Correlation Between Softbank Group and Lumen Technologies

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

Diversification Opportunities for Softbank Group and Lumen Technologies

0.08

Correlation Coefficient

Softbank Group  Lumen Technologies

Significant diversification

The 3 months correlation between Softbank and Lumen is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Softbank Group Corp and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies 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 Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of Softbank Group i.e., Softbank Group and Lumen Technologies go up and down completely randomly.

Pair Corralation between Softbank Group and Lumen Technologies

Assuming the 90 days horizon Softbank Group Corp is expected to generate 1.19 times more return on investment than Lumen Technologies. However, Softbank Group is 1.19 times more volatile than Lumen Technologies. It trades about -0.12 of its potential returns per unit of risk. Lumen Technologies is currently generating about -0.26 per unit of risk. If you would invest  6,325  in Softbank Group Corp on October 15, 2024 and sell it today you would lose (493.00) from holding Softbank Group Corp or give up 7.79% of portfolio value over 90 days.

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

Softbank Group Corp  vs.  Lumen Technologies

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.

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Softbank Group and Lumen Technologies

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

The idea behind Softbank Group Corp and Lumen Technologies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.