Correlation Between SoftBank Group and Microlise Group

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

Diversification Opportunities for SoftBank Group and Microlise Group

-0.68

Correlation Coefficient

SoftBank Group  Microlise Group

Excellent diversification

The 3 months correlation between SoftBank and Microlise is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp and Microlise Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microlise Group PLC 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 Microlise Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microlise Group PLC has no effect on the direction of SoftBank Group i.e., SoftBank Group and Microlise Group go up and down completely randomly.

Pair Corralation between SoftBank Group and Microlise Group

Assuming the 90 days trading horizon SoftBank Group Corp is expected to generate 0.8 times more return on investment than Microlise Group. However, SoftBank Group Corp is 1.26 times less risky than Microlise Group. It trades about 0.01 of its potential returns per unit of risk. Microlise Group PLC is currently generating about -0.11 per unit of risk. If you would invest  879,200  in SoftBank Group Corp on September 23, 2024 and sell it today you would lose (3,200) from holding SoftBank Group Corp or give up 0.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	70.45%
Values	Daily Returns

SoftBank Group Corp  vs.  Microlise Group PLC

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Microlise Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microlise Group PLC 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 Microlise Group

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

The idea behind SoftBank Group Corp and Microlise Group PLC 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.