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

-0.35

Correlation Coefficient

SoftBank Group  Freeport McMoRan

Very good diversification

The 3 months correlation between SoftBank and Freeport is -0.35. 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 under-perform the Freeport McMoRan. In addition to that, SoftBank Group is 1.15 times more volatile than Freeport McMoRan. It trades about -0.05 of its total potential returns per unit of risk. Freeport McMoRan is currently generating about 0.03 per unit of volatility. If you would invest  3,837  in Freeport McMoRan on December 30, 2024 and sell it today you would earn a total of  116.00  from holding Freeport McMoRan or generate 3.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	69.23%
Values	Daily Returns

SoftBank Group Corp  vs.  Freeport McMoRan

SoftBank Group Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days SoftBank Group Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Freeport McMoRan

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoRan are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Freeport McMoRan is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

The idea behind SoftBank Group Corp and Freeport McMoRan 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.