Correlation Between SoftBank Group and BP Plc
Can any of the company-specific risk be diversified away by investing in both SoftBank Group and BP Plc 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 BP Plc 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 BP plc, you can compare the effects of market volatilities on SoftBank Group and BP Plc 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 BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoftBank Group and BP Plc.
Diversification Opportunities for SoftBank Group and BP Plc
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between SoftBank and BP-A is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of SoftBank Group i.e., SoftBank Group and BP Plc go up and down completely randomly.
Pair Corralation between SoftBank Group and BP Plc
Assuming the 90 days trading horizon SoftBank Group Corp is expected to generate 2.08 times more return on investment than BP Plc. However, SoftBank Group is 2.08 times more volatile than BP plc. It trades about 0.2 of its potential returns per unit of risk. BP plc is currently generating about -0.36 per unit of risk. If you would invest 876,000 in SoftBank Group Corp on October 21, 2024 and sell it today you would earn a total of 31,999 from holding SoftBank Group Corp or generate 3.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 57.89% |
| Values | Daily Returns |
SoftBank Group Corp vs. BP plc
Performance |
| Timeline |
| SoftBank Group Corp |
| BP plc |
SoftBank Group and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SoftBank Group and BP Plc
The main advantage of trading using opposite SoftBank Group and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoftBank Group position performs unexpectedly, BP Plc 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 BP Plc will offset losses from the drop in BP Plc's long position.| SoftBank Group vs. GlobalData PLC | SoftBank Group vs. British American Tobacco | SoftBank Group vs. Public Storage | SoftBank Group vs. Premier Foods PLC |
| BP Plc vs. URU Metals | BP Plc vs. Golden Metal Resources | BP Plc vs. Host Hotels Resorts | BP Plc vs. Fulcrum Metals PLC |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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