Correlation Between SoftBank Group and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both SoftBank Group and Freeport McMoRan 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 Freeport McMoRan 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 Freeport McMoRan, you can compare the effects of market volatilities on SoftBank Group and Freeport McMoRan 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 Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoftBank Group and Freeport McMoRan.
Diversification Opportunities for SoftBank Group and Freeport McMoRan
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SoftBank and Freeport is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 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 Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of SoftBank Group i.e., SoftBank Group and Freeport McMoRan go up and down completely randomly.
Pair Corralation between SoftBank Group and Freeport McMoRan
Assuming the 90 days trading horizon SoftBank Group Corp is expected to generate 1.16 times more return on investment than Freeport McMoRan. However, SoftBank Group is 1.16 times more volatile than Freeport McMoRan. It trades about 0.05 of its potential returns per unit of risk. Freeport McMoRan is currently generating about 0.01 per unit of risk. If you would invest 555,735 in SoftBank Group Corp on September 23, 2024 and sell it today you would earn a total of 320,265 from holding SoftBank Group Corp or generate 57.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 82.04% |
Values | Daily Returns |
SoftBank Group Corp vs. Freeport McMoRan
Performance |
Timeline |
SoftBank Group Corp |
Freeport McMoRan |
SoftBank Group and Freeport McMoRan Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SoftBank Group and Freeport McMoRan
The main advantage of trading using opposite SoftBank Group and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoftBank Group position performs unexpectedly, Freeport McMoRan 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 Freeport McMoRan will offset losses from the drop in Freeport McMoRan's long position.SoftBank Group vs. Pentair PLC | SoftBank Group vs. Finnair Oyj | SoftBank Group vs. Fair Oaks Income | SoftBank Group vs. Solstad Offshore ASA |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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