Correlation Between Sony Group and Panasonic Corp

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

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

Diversification Opportunities for Sony Group and Panasonic Corp

0.72

Correlation Coefficient

Sony Group  Panasonic Corp

Poor diversification

The 3 months correlation between Sony and Panasonic is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group Corp and Panasonic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panasonic Corp and Sony 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 Sony Group Corp are associated (or correlated) with Panasonic Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panasonic Corp has no effect on the direction of Sony Group i.e., Sony Group and Panasonic Corp go up and down completely randomly.

Pair Corralation between Sony Group and Panasonic Corp

Given the investment horizon of 90 days Sony Group Corp is expected to generate 0.7 times more return on investment than Panasonic Corp. However, Sony Group Corp is 1.43 times less risky than Panasonic Corp. It trades about 0.21 of its potential returns per unit of risk. Panasonic Corp is currently generating about 0.14 per unit of risk. If you would invest  1,810  in Sony Group Corp on September 19, 2024 and sell it today you would earn a total of  346.50  from holding Sony Group Corp or generate 19.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Sony Group Corp  vs.  Panasonic Corp

Sony Group Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Sony Group showed solid returns over the last few months and may actually be approaching a breakup point.

Panasonic Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Panasonic Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Panasonic Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sony Group and Panasonic Corp

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

The idea behind Sony Group Corp and Panasonic 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.