Correlation Between NVIDIA and SoftBank Group

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

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

Diversification Opportunities for NVIDIA and SoftBank Group

-0.14

Correlation Coefficient

NVIDIA  SoftBank Group

Good diversification

The 3 months correlation between NVIDIA and SoftBank is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA 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 NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and SoftBank Group go up and down completely randomly.

Pair Corralation between NVIDIA and SoftBank Group

Given the investment horizon of 90 days NVIDIA is expected to generate 1.27 times less return on investment than SoftBank Group. But when comparing it to its historical volatility, NVIDIA is 2.25 times less risky than SoftBank Group. It trades about 0.15 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 Against
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

NVIDIA  vs.  SoftBank Group Corp

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 NVIDIA and SoftBank Group

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

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.