Correlation Between Total Soft and BH

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

By analyzing existing cross correlation between Total Soft Bank and BH Co, you can compare the effects of market volatilities on Total Soft and BH 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 Total Soft with a short position of BH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Soft and BH.

Diversification Opportunities for Total Soft and BH

0.31

Correlation Coefficient

Total Soft  BH

Weak diversification

The 3 months correlation between Total and BH is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank and BH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Co and Total Soft 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 Total Soft Bank are associated (or correlated) with BH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Co has no effect on the direction of Total Soft i.e., Total Soft and BH go up and down completely randomly.

Pair Corralation between Total Soft and BH

Assuming the 90 days trading horizon Total Soft Bank is expected to under-perform the BH. In addition to that, Total Soft is 3.48 times more volatile than BH Co. It trades about -0.05 of its total potential returns per unit of risk. BH Co is currently generating about 0.4 per unit of volatility. If you would invest  1,420,670  in BH Co on October 10, 2024 and sell it today you would earn a total of  326,330  from holding BH Co or generate 22.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Total Soft Bank  vs.  BH Co

Total Soft Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Total Soft sustained solid returns over the last few months and may actually be approaching a breakup point.

BH Co

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BH Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BH may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Total Soft and BH

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

The idea behind Total Soft Bank and BH Co 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 Global Correlations module to find global opportunities by holding instruments from different markets.