Correlation Between Vodafone Group and SoftBank Group

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

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

Diversification Opportunities for Vodafone Group and SoftBank Group

0.47

Correlation Coefficient

Vodafone Group  SoftBank Group

Very weak diversification

The 3 months correlation between Vodafone and SoftBank is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC 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 Vodafone 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 Vodafone Group PLC 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 Vodafone Group i.e., Vodafone Group and SoftBank Group go up and down completely randomly.

Pair Corralation between Vodafone Group and SoftBank Group

Assuming the 90 days horizon Vodafone Group PLC is expected to under-perform the SoftBank Group. In addition to that, Vodafone Group is 1.76 times more volatile than SoftBank Group Corp. It trades about -0.05 of its total potential returns per unit of risk. SoftBank Group Corp is currently generating about -0.04 per unit of volatility. If you would invest  3,050  in SoftBank Group Corp on October 11, 2024 and sell it today you would lose (112.00) from holding SoftBank Group Corp or give up 3.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

Vodafone Group PLC  vs.  SoftBank Group Corp

Vodafone Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. In spite of fairly strong fundamental drivers, SoftBank Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vodafone Group and SoftBank Group

The main advantage of trading using opposite Vodafone Group and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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 Vodafone Group PLC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.