Correlation Between MTI Wireless and SoftBank Group

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

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

Diversification Opportunities for MTI Wireless and SoftBank Group

0.16

Correlation Coefficient

MTI Wireless  SoftBank Group

Average diversification

The 3 months correlation between MTI and SoftBank is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge 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 MTI Wireless 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 MTI Wireless Edge 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 MTI Wireless i.e., MTI Wireless and SoftBank Group go up and down completely randomly.

Pair Corralation between MTI Wireless and SoftBank Group

Assuming the 90 days trading horizon MTI Wireless is expected to generate 2.06 times less return on investment than SoftBank Group. But when comparing it to its historical volatility, MTI Wireless Edge is 2.05 times less risky than SoftBank Group. It trades about 0.13 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  875,100  in SoftBank Group Corp on October 25, 2024 and sell it today you would earn a total of  137,400  from holding SoftBank Group Corp or generate 15.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	67.21%
Values	Daily Returns

MTI Wireless Edge  vs.  SoftBank Group Corp

MTI Wireless Edge

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MTI Wireless Edge are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, MTI Wireless may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SoftBank Group Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with MTI Wireless and SoftBank Group

The main advantage of trading using opposite MTI Wireless and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTI Wireless 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 MTI Wireless Edge 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.