Correlation Between SoftBank Group and Guaranty Trust

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

Diversification Opportunities for SoftBank Group and Guaranty Trust

0.55

Correlation Coefficient

SoftBank Group  Guaranty Trust

Very weak diversification

The 3 months correlation between SoftBank and Guaranty is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp and Guaranty Trust Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guaranty Trust Holding 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 Guaranty Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guaranty Trust Holding has no effect on the direction of SoftBank Group i.e., SoftBank Group and Guaranty Trust go up and down completely randomly.

Pair Corralation between SoftBank Group and Guaranty Trust

Assuming the 90 days trading horizon SoftBank Group Corp is expected to generate 1.29 times more return on investment than Guaranty Trust. However, SoftBank Group is 1.29 times more volatile than Guaranty Trust Holding. It trades about 0.11 of its potential returns per unit of risk. Guaranty Trust Holding is currently generating about 0.01 per unit of risk. If you would invest  854,181  in SoftBank Group Corp on September 20, 2024 and sell it today you would earn a total of  98,519  from holding SoftBank Group Corp or generate 11.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	64.62%
Values	Daily Returns

SoftBank Group Corp  vs.  Guaranty Trust Holding

SoftBank Group Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SoftBank Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Guaranty Trust Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guaranty Trust Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Guaranty Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SoftBank Group and Guaranty Trust

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

The idea behind SoftBank Group Corp and Guaranty Trust Holding 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.