Correlation Between SoftBank Group and Auction Technology

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

Diversification Opportunities for SoftBank Group and Auction Technology

0.5

Correlation Coefficient

SoftBank Group  Auction Technology

Very weak diversification

The 3 months correlation between SoftBank and Auction is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp and Auction Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auction Technology 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 Auction Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auction Technology has no effect on the direction of SoftBank Group i.e., SoftBank Group and Auction Technology go up and down completely randomly.

Pair Corralation between SoftBank Group and Auction Technology

Assuming the 90 days trading horizon SoftBank Group Corp is expected to generate 0.95 times more return on investment than Auction Technology. However, SoftBank Group Corp is 1.05 times less risky than Auction Technology. It trades about 0.08 of its potential returns per unit of risk. Auction Technology Group is currently generating about 0.01 per unit of risk. If you would invest  490,671  in SoftBank Group Corp on October 5, 2024 and sell it today you would earn a total of  427,829  from holding SoftBank Group Corp or generate 87.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.53%
Values	Daily Returns

SoftBank Group Corp  vs.  Auction Technology Group

SoftBank Group Corp

Risk-Adjusted Performance

0 of 100

Insignificant

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 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Auction Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Auction Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoftBank Group and Auction Technology

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

The idea behind SoftBank Group Corp and Auction Technology Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.