Correlation Between Sony Group and Wearable Devices

Can any of the company-specific risk be diversified away by investing in both Sony Group and Wearable Devices 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 Wearable Devices 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 Wearable Devices, you can compare the effects of market volatilities on Sony Group and Wearable Devices 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 Wearable Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sony Group and Wearable Devices.

Diversification Opportunities for Sony Group and Wearable Devices

-0.41

Correlation Coefficient

Sony Group  Wearable Devices

Very good diversification

The 3 months correlation between Sony and Wearable is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group Corp and Wearable Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wearable Devices 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 Wearable Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wearable Devices has no effect on the direction of Sony Group i.e., Sony Group and Wearable Devices go up and down completely randomly.

Pair Corralation between Sony Group and Wearable Devices

Given the investment horizon of 90 days Sony Group is expected to generate 1878.1 times less return on investment than Wearable Devices. But when comparing it to its historical volatility, Sony Group Corp is 140.53 times less risky than Wearable Devices. It trades about 0.02 of its potential returns per unit of risk. Wearable Devices is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  0.13  in Wearable Devices on August 30, 2024 and sell it today you would earn a total of  16.87  from holding Wearable Devices or generate 12976.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Sony Group Corp  vs.  Wearable Devices

Sony Group Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Sony Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Wearable Devices

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wearable Devices are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Wearable Devices showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sony Group and Wearable Devices

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

The idea behind Sony Group Corp and Wearable Devices 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.