Correlation Between Fresenius Medical and SoftBank Group

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

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

Diversification Opportunities for Fresenius Medical and SoftBank Group

0.17

Correlation Coefficient

Fresenius Medical  SoftBank Group

Average diversification

The 3 months correlation between Fresenius and SoftBank is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care 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 Fresenius Medical 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 Fresenius Medical Care 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 Fresenius Medical i.e., Fresenius Medical and SoftBank Group go up and down completely randomly.

Pair Corralation between Fresenius Medical and SoftBank Group

Assuming the 90 days trading horizon Fresenius Medical is expected to generate 1.17 times less return on investment than SoftBank Group. But when comparing it to its historical volatility, Fresenius Medical Care is 1.58 times less risky than SoftBank Group. It trades about 0.19 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  782,658  in SoftBank Group Corp on September 5, 2024 and sell it today you would earn a total of  132,342  from holding SoftBank Group Corp or generate 16.91% return on investment over 90 days.

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

Fresenius Medical Care  vs.  SoftBank Group Corp

Fresenius Medical Care

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fresenius Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

SoftBank Group Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 10 (%) 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 Fresenius Medical and SoftBank Group

The main advantage of trading using opposite Fresenius Medical and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius Medical 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 Fresenius Medical Care 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.