Correlation Between Sony and BeiGene

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

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

Diversification Opportunities for Sony and BeiGene

-0.31

Correlation Coefficient

Sony  BeiGene

Very good diversification

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

Pair Corralation between Sony and BeiGene

Assuming the 90 days trading horizon Sony Group is expected to generate 0.55 times more return on investment than BeiGene. However, Sony Group is 1.83 times less risky than BeiGene. It trades about 0.37 of its potential returns per unit of risk. BeiGene is currently generating about -0.08 per unit of risk. If you would invest  11,323  in Sony Group on September 24, 2024 and sell it today you would earn a total of  1,842  from holding Sony Group or generate 16.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Sony Group  vs.  BeiGene

Sony Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Sony sustained solid returns over the last few months and may actually be approaching a breakup point.

BeiGene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BeiGene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, BeiGene is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sony and BeiGene

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

The idea behind Sony Group and BeiGene 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.