Correlation Between Lumen Technologies and Softbank Group

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

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

Diversification Opportunities for Lumen Technologies and Softbank Group

-0.11

Correlation Coefficient

Lumen Technologies  Softbank Group

Good diversification

The 3 months correlation between Lumen and Softbank is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies 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 Lumen Technologies 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 Lumen Technologies 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 Lumen Technologies i.e., Lumen Technologies and Softbank Group go up and down completely randomly.

Pair Corralation between Lumen Technologies and Softbank Group

Given the investment horizon of 90 days Lumen Technologies is expected to under-perform the Softbank Group. In addition to that, Lumen Technologies is 1.02 times more volatile than Softbank Group Corp. It trades about -0.34 of its total potential returns per unit of risk. Softbank Group Corp is currently generating about -0.02 per unit of volatility. If you would invest  5,837  in Softbank Group Corp on September 27, 2024 and sell it today you would lose (152.00) from holding Softbank Group Corp or give up 2.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Lumen Technologies  vs.  Softbank Group Corp

Lumen Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lumen Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Softbank Group Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Softbank Group Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Softbank Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lumen Technologies and Softbank Group

The main advantage of trading using opposite Lumen Technologies and Softbank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumen Technologies 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 Lumen Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.