Correlation Between SoftBank Group and PPHE Hotel

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

Diversification Opportunities for SoftBank Group and PPHE Hotel

0.27

Correlation Coefficient

SoftBank Group  PPHE Hotel

Modest diversification

The 3 months correlation between SoftBank and PPHE is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp and PPHE Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE Hotel Group 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 PPHE Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE Hotel Group has no effect on the direction of SoftBank Group i.e., SoftBank Group and PPHE Hotel go up and down completely randomly.

Pair Corralation between SoftBank Group and PPHE Hotel

Assuming the 90 days trading horizon SoftBank Group is expected to generate 4.35 times less return on investment than PPHE Hotel. In addition to that, SoftBank Group is 1.33 times more volatile than PPHE Hotel Group. It trades about 0.06 of its total potential returns per unit of risk. PPHE Hotel Group is currently generating about 0.37 per unit of volatility. If you would invest  117,000  in PPHE Hotel Group on September 23, 2024 and sell it today you would earn a total of  19,500  from holding PPHE Hotel Group or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.18%
Values	Daily Returns

SoftBank Group Corp  vs.  PPHE Hotel Group

SoftBank Group Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SoftBank Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PPHE Hotel Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE Hotel Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, PPHE Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SoftBank Group and PPHE Hotel

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

The idea behind SoftBank Group Corp and PPHE Hotel 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.