Correlation Between Sony and A O

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

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

Diversification Opportunities for Sony and A O

0.61

Correlation Coefficient

Sony  A O

Poor diversification

The 3 months correlation between Sony and AOS is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and A O Smith in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A O Smith 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 A O. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A O Smith has no effect on the direction of Sony i.e., Sony and A O go up and down completely randomly.

Pair Corralation between Sony and A O

If you would invest  40,100  in Sony Group on September 27, 2024 and sell it today you would earn a total of  2,900  from holding Sony Group or generate 7.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Sony Group  vs.  A O Smith

Sony Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Sony displayed solid returns over the last few months and may actually be approaching a breakup point.

A O Smith

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in A O Smith are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, A O 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 A O

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

The idea behind Sony Group and A O Smith 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.