Correlation Between Sony Group and Xiaomi Corp

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

Diversification Opportunities for Sony Group and Xiaomi Corp

-0.12

Correlation Coefficient

Sony Group  Xiaomi Corp

Good diversification

The 3 months correlation between Sony and Xiaomi is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group Corp and Xiaomi Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi Corp ADR 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 Xiaomi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi Corp ADR has no effect on the direction of Sony Group i.e., Sony Group and Xiaomi Corp go up and down completely randomly.

Pair Corralation between Sony Group and Xiaomi Corp

Given the investment horizon of 90 days Sony Group is expected to generate 17.87 times less return on investment than Xiaomi Corp. But when comparing it to its historical volatility, Sony Group Corp is 1.73 times less risky than Xiaomi Corp. It trades about 0.02 of its potential returns per unit of risk. Xiaomi Corp ADR is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,232  in Xiaomi Corp ADR on August 30, 2024 and sell it today you would earn a total of  587.00  from holding Xiaomi Corp ADR or generate 47.65% return on investment over 90 days.

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

Sony Group Corp  vs.  Xiaomi Corp ADR

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.

Xiaomi Corp ADR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi Corp ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Xiaomi Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sony Group and Xiaomi Corp

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

The idea behind Sony Group Corp and Xiaomi Corp ADR 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.