Correlation Between International Consolidated and SoftBank Group

Can any of the company-specific risk be diversified away by investing in both International Consolidated 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 International Consolidated and SoftBank Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between International Consolidated Airlines and SoftBank Group Corp, you can compare the effects of market volatilities on International Consolidated 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 International Consolidated with a short position of SoftBank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and SoftBank Group.

Diversification Opportunities for International Consolidated and SoftBank Group

0.65

Correlation Coefficient

International Consolidated  SoftBank Group

Poor diversification

The 3 months correlation between International and SoftBank is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air 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 International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and SoftBank Group go up and down completely randomly.

Pair Corralation between International Consolidated and SoftBank Group

Assuming the 90 days trading horizon International Consolidated Airlines is expected to generate 0.69 times more return on investment than SoftBank Group. However, International Consolidated Airlines is 1.44 times less risky than SoftBank Group. It trades about 0.32 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.17 per unit of risk. If you would invest  20,810  in International Consolidated Airlines on September 19, 2024 and sell it today you would earn a total of  8,920  from holding International Consolidated Airlines or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	65.63%
Values	Daily Returns

International Consolidated Air  vs.  SoftBank Group Corp

International Consolidated

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

SoftBank Group Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 13 (%) 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.

Pair Trading with International Consolidated and SoftBank Group

The main advantage of trading using opposite International Consolidated and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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.

The idea behind International Consolidated Airlines and SoftBank Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.