Correlation Between SoftBank Group and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both SoftBank Group and Smithson Investment 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 SoftBank Group and Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SoftBank Group Corp and Smithson Investment Trust, you can compare the effects of market volatilities on SoftBank Group and Smithson Investment 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 SoftBank Group with a short position of Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoftBank Group and Smithson Investment.
Diversification Opportunities for SoftBank Group and Smithson Investment
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SoftBank and Smithson is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust and SoftBank Group 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 SoftBank Group Corp are associated (or correlated) with Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of SoftBank Group i.e., SoftBank Group and Smithson Investment go up and down completely randomly.
Pair Corralation between SoftBank Group and Smithson Investment
Assuming the 90 days trading horizon SoftBank Group Corp is expected to under-perform the Smithson Investment. In addition to that, SoftBank Group is 2.16 times more volatile than Smithson Investment Trust. It trades about -0.05 of its total potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.3 per unit of volatility. If you would invest 140,600 in Smithson Investment Trust on September 3, 2024 and sell it today you would earn a total of 9,000 from holding Smithson Investment Trust or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 71.43% |
| Values | Daily Returns |
SoftBank Group Corp vs. Smithson Investment Trust
Performance |
| Timeline |
| SoftBank Group Corp |
| Smithson Investment Trust |
SoftBank Group and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SoftBank Group and Smithson Investment
The main advantage of trading using opposite SoftBank Group and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoftBank Group position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| SoftBank Group vs. Home Depot | SoftBank Group vs. Beazer Homes USA | SoftBank Group vs. Ecclesiastical Insurance Office | SoftBank Group vs. Systemair AB |
| Smithson Investment vs. SupplyMe Capital PLC | Smithson Investment vs. 88 Energy | Smithson Investment vs. Vodafone Group PLC | Smithson Investment vs. Vodafone Group PLC |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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