Correlation Between Sparebank and SoftBank Group
Can any of the company-specific risk be diversified away by investing in both Sparebank and SoftBank Group 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 Sparebank and SoftBank Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SR and SoftBank Group Corp, you can compare the effects of market volatilities on Sparebank and SoftBank Group 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 Sparebank with a short position of SoftBank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and SoftBank Group.
Diversification Opportunities for Sparebank and SoftBank Group
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sparebank and SoftBank is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and SoftBank Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftBank Group Corp and Sparebank 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 Sparebank 1 SR are associated (or correlated) with SoftBank Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftBank Group Corp has no effect on the direction of Sparebank i.e., Sparebank and SoftBank Group go up and down completely randomly.
Pair Corralation between Sparebank and SoftBank Group
Assuming the 90 days trading horizon Sparebank is expected to generate 2.64 times less return on investment than SoftBank Group. But when comparing it to its historical volatility, Sparebank 1 SR is 3.0 times less risky than SoftBank Group. It trades about 0.07 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 629,343 in SoftBank Group Corp on September 26, 2024 and sell it today you would earn a total of 259,058 from holding SoftBank Group Corp or generate 41.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 77.32% |
| Values | Daily Returns |
Sparebank 1 SR vs. SoftBank Group Corp
Performance |
| Timeline |
| Sparebank 1 SR |
| SoftBank Group Corp |
Sparebank and SoftBank Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and SoftBank Group
The main advantage of trading using opposite Sparebank and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, SoftBank Group 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 SoftBank Group will offset losses from the drop in SoftBank Group's long position.| Sparebank vs. CVS Health Corp | Sparebank vs. Induction Healthcare Group | Sparebank vs. Universal Health Services | Sparebank vs. PPHE Hotel Group |
| SoftBank Group vs. Lindsell Train Investment | SoftBank Group vs. Cembra Money Bank | SoftBank Group vs. Sparebank 1 SR | SoftBank Group vs. Lloyds Banking Group |
Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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