Correlation Between SoftBank Group and Alfa Financial

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

Diversification Opportunities for SoftBank Group and Alfa Financial

0.68

Correlation Coefficient

SoftBank Group  Alfa Financial

Poor diversification

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

Pair Corralation between SoftBank Group and Alfa Financial

Assuming the 90 days trading horizon SoftBank Group Corp is expected to generate 1.45 times more return on investment than Alfa Financial. However, SoftBank Group is 1.45 times more volatile than Alfa Financial Software. It trades about 0.02 of its potential returns per unit of risk. Alfa Financial Software is currently generating about -0.05 per unit of risk. If you would invest  915,000  in SoftBank Group Corp on October 4, 2024 and sell it today you would earn a total of  3,500  from holding SoftBank Group Corp or generate 0.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	65.0%
Values	Daily Returns

SoftBank Group Corp  vs.  Alfa Financial Software

SoftBank Group Corp

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days SoftBank Group Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady basic indicators, SoftBank Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alfa Financial Software

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SoftBank Group and Alfa Financial

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

The idea behind SoftBank Group Corp and Alfa Financial Software 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.