Correlation Between SoftBank Group and Baltic Panamax

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

Diversification Opportunities for SoftBank Group and Baltic Panamax

-0.71

Correlation Coefficient

SoftBank Group  Baltic Panamax

Pay attention - limited upside

The 3 months correlation between SoftBank and Baltic is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp and Baltic Panamax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baltic Panamax 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 Baltic Panamax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baltic Panamax has no effect on the direction of SoftBank Group i.e., SoftBank Group and Baltic Panamax go up and down completely randomly.

Pair Corralation between SoftBank Group and Baltic Panamax

Assuming the 90 days trading horizon SoftBank Group Corp is expected to generate 1.41 times more return on investment than Baltic Panamax. However, SoftBank Group is 1.41 times more volatile than Baltic Panamax. It trades about 0.18 of its potential returns per unit of risk. Baltic Panamax is currently generating about -0.29 per unit of risk. If you would invest  817,572  in SoftBank Group Corp on September 18, 2024 and sell it today you would earn a total of  166,128  from holding SoftBank Group Corp or generate 20.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	66.15%
Values	Daily Returns

SoftBank Group Corp  vs.  Baltic Panamax

Pair Trading with SoftBank Group and Baltic Panamax

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

The idea behind SoftBank Group Corp and Baltic Panamax 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.