Correlation Between Sony and KeyCorp
Can any of the company-specific risk be diversified away by investing in both Sony and KeyCorp 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 KeyCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sony Group and KeyCorp, you can compare the effects of market volatilities on Sony and KeyCorp 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 KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sony and KeyCorp.
Diversification Opportunities for Sony and KeyCorp
Very poor diversification
The 3 months correlation between Sony and KeyCorp is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Sony i.e., Sony and KeyCorp go up and down completely randomly.
Pair Corralation between Sony and KeyCorp
Assuming the 90 days trading horizon Sony Group is expected to generate 1.19 times more return on investment than KeyCorp. However, Sony is 1.19 times more volatile than KeyCorp. It trades about 0.38 of its potential returns per unit of risk. KeyCorp is currently generating about -0.15 per unit of risk. If you would invest 11,323 in Sony Group on September 25, 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 Together |
Strength | Strong |
Accuracy | 95.45% |
Values | Daily Returns |
Sony Group vs. KeyCorp
Performance |
Timeline |
Sony Group |
KeyCorp |
Sony and KeyCorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sony and KeyCorp
The main advantage of trading using opposite Sony and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sony position performs unexpectedly, KeyCorp 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 KeyCorp will offset losses from the drop in KeyCorp's long position.Sony vs. Healthpeak Properties | Sony vs. Zoom Video Communications | Sony vs. Agilent Technologies | Sony vs. TAL Education Group |
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Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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