Correlation Between Hilton Worldwide and SoFi Technologies

Can any of the company-specific risk be diversified away by investing in both Hilton Worldwide and SoFi Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hilton Worldwide and SoFi Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hilton Worldwide Holdings and SoFi Technologies, you can compare the effects of market volatilities on Hilton Worldwide and SoFi Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hilton Worldwide with a short position of SoFi Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Worldwide and SoFi Technologies.

Diversification Opportunities for Hilton Worldwide and SoFi Technologies

0.91

Correlation Coefficient

Hilton Worldwide  SoFi Technologies

Almost no diversification

The 3 months correlation between Hilton and SoFi is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and SoFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Technologies and Hilton Worldwide is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hilton Worldwide Holdings are associated (or correlated) with SoFi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Technologies has no effect on the direction of Hilton Worldwide i.e., Hilton Worldwide and SoFi Technologies go up and down completely randomly.

Pair Corralation between Hilton Worldwide and SoFi Technologies

Considering the 90-day investment horizon Hilton Worldwide is expected to generate 5.74 times less return on investment than SoFi Technologies. But when comparing it to its historical volatility, Hilton Worldwide Holdings is 2.32 times less risky than SoFi Technologies. It trades about 0.07 of its potential returns per unit of risk. SoFi Technologies is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,411  in SoFi Technologies on September 12, 2024 and sell it today you would earn a total of  118.00  from holding SoFi Technologies or generate 8.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Hilton Worldwide Holdings  vs.  SoFi Technologies

Hilton Worldwide Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Hilton Worldwide unveiled solid returns over the last few months and may actually be approaching a breakup point.

SoFi Technologies

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Technologies are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, SoFi Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hilton Worldwide and SoFi Technologies

The main advantage of trading using opposite Hilton Worldwide and SoFi Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Worldwide position performs unexpectedly, SoFi Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SoFi Technologies will offset losses from the drop in SoFi Technologies' long position.

The idea behind Hilton Worldwide Holdings and SoFi Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.