Correlation Between SoftBank Corp and JSE

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

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

Diversification Opportunities for SoftBank Corp and JSE

-0.62

Correlation Coefficient

SoftBank Corp  JSE

Excellent diversification

The 3 months correlation between SoftBank and JSE is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Corp and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited and SoftBank Corp 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 Corp are associated (or correlated) with JSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSE Limited has no effect on the direction of SoftBank Corp i.e., SoftBank Corp and JSE go up and down completely randomly.

Pair Corralation between SoftBank Corp and JSE

Assuming the 90 days horizon SoftBank Corp is expected to under-perform the JSE. But the pink sheet apears to be less risky and, when comparing its historical volatility, SoftBank Corp is 2.25 times less risky than JSE. The pink sheet trades about -0.1 of its potential returns per unit of risk. The JSE Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  550.00  in JSE Limited on September 26, 2024 and sell it today you would earn a total of  115.00  from holding JSE Limited or generate 20.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SoftBank Corp  vs.  JSE Limited

SoftBank Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SoftBank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

JSE Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JSE Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, JSE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoftBank Corp and JSE

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

The idea behind SoftBank Corp and JSE Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.