Correlation Between Global Partners and SoftBank Corp

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

By analyzing existing cross correlation between Global Partners LP and SoftBank Corp, you can compare the effects of market volatilities on Global Partners and SoftBank Corp 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 Global Partners with a short position of SoftBank Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Partners and SoftBank Corp.

Diversification Opportunities for Global Partners and SoftBank Corp

-0.32

Correlation Coefficient

Global Partners  SoftBank Corp

Very good diversification

The 3 months correlation between Global and SoftBank is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Global Partners LP and SoftBank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftBank Corp and Global Partners 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 Global Partners LP are associated (or correlated) with SoftBank Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftBank Corp has no effect on the direction of Global Partners i.e., Global Partners and SoftBank Corp go up and down completely randomly.

Pair Corralation between Global Partners and SoftBank Corp

Assuming the 90 days trading horizon Global Partners is expected to generate 2.56 times less return on investment than SoftBank Corp. But when comparing it to its historical volatility, Global Partners LP is 4.82 times less risky than SoftBank Corp. It trades about 0.05 of its potential returns per unit of risk. SoftBank Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,247  in SoftBank Corp on September 27, 2024 and sell it today you would earn a total of  7.00  from holding SoftBank Corp or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Global Partners LP  vs.  SoftBank Corp

Global Partners LP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global Partners is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

SoftBank Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SoftBank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, SoftBank Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Partners and SoftBank Corp

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

The idea behind Global Partners LP and SoftBank Corp 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.