Correlation Between SoftBank Group and AES Corp

Can any of the company-specific risk be diversified away by investing in both SoftBank Group and AES Corp 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 AES Corp 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 AES Corp, you can compare the effects of market volatilities on SoftBank Group and AES Corp 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 AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoftBank Group and AES Corp.

Diversification Opportunities for SoftBank Group and AES Corp

-0.77

Correlation Coefficient

SoftBank Group  AES Corp

Pay attention - limited upside

The 3 months correlation between SoftBank and AES is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp 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 AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp has no effect on the direction of SoftBank Group i.e., SoftBank Group and AES Corp go up and down completely randomly.

Pair Corralation between SoftBank Group and AES Corp

Assuming the 90 days trading horizon SoftBank Group Corp is expected to generate 1.23 times more return on investment than AES Corp. However, SoftBank Group is 1.23 times more volatile than AES Corp. It trades about 0.02 of its potential returns per unit of risk. AES Corp is currently generating about -0.26 per unit of risk. If you would invest  865,454  in SoftBank Group Corp on September 24, 2024 and sell it today you would earn a total of  10,546  from holding SoftBank Group Corp or generate 1.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	67.69%
Values	Daily Returns

SoftBank Group Corp  vs.  AES Corp

SoftBank Group Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SoftBank Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

AES Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AES Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with SoftBank Group and AES Corp

The main advantage of trading using opposite SoftBank Group and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoftBank Group position performs unexpectedly, AES Corp 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 AES Corp will offset losses from the drop in AES Corp's long position.

The idea behind SoftBank Group Corp and AES Corp 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 Stocks Directory module to find actively traded stocks across global markets.