Correlation Between FinVolution and SoftBank Group

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

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

Diversification Opportunities for FinVolution and SoftBank Group

0.39

Correlation Coefficient

FinVolution  SoftBank Group

Weak diversification

The 3 months correlation between FinVolution and SoftBank is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group 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 FinVolution 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 FinVolution Group 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 FinVolution i.e., FinVolution and SoftBank Group go up and down completely randomly.

Pair Corralation between FinVolution and SoftBank Group

Given the investment horizon of 90 days FinVolution is expected to generate 6.95 times less return on investment than SoftBank Group. But when comparing it to its historical volatility, FinVolution Group is 3.51 times less risky than SoftBank Group. It trades about 0.04 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  681.00  in SoftBank Group Corp on October 5, 2024 and sell it today you would earn a total of  4,949  from holding SoftBank Group Corp or generate 726.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.8%
Values	Daily Returns

FinVolution Group  vs.  SoftBank Group Corp

FinVolution Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FinVolution Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FinVolution is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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. Despite nearly fragile basic indicators, SoftBank Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FinVolution and SoftBank Group

The main advantage of trading using opposite FinVolution and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FinVolution 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 FinVolution Group 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.