Correlation Between Dow Jones and SoftBank Group
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and SoftBank Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and SoftBank Group Corp, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of SoftBank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SoftBank Group.
Diversification Opportunities for Dow Jones and SoftBank Group
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and SoftBank is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and SoftBank Group go up and down completely randomly.
Pair Corralation between Dow Jones and SoftBank Group
Assuming the 90 days trading horizon Dow Jones is expected to generate 8.6 times less return on investment than SoftBank Group. But when comparing it to its historical volatility, Dow Jones Industrial is 9.38 times less risky than SoftBank Group. It trades about 0.12 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,325 in SoftBank Group Corp on August 27, 2024 and sell it today you would earn a total of 3,999 from holding SoftBank Group Corp or generate 301.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. SoftBank Group Corp
Performance |
| Timeline |
Dow Jones and SoftBank Group Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SoftBank Group Corp
Pair trading matchups for SoftBank Group
Pair Trading with Dow Jones and SoftBank Group
The main advantage of trading using opposite Dow Jones and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| SoftBank Group vs. Tencent Holdings | SoftBank Group vs. BYD Company Limited | SoftBank Group vs. Geely Automobile Holdings | SoftBank Group vs. Baidu Inc |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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