Correlation Between Sony and El Puerto

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

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

Diversification Opportunities for Sony and El Puerto

-0.64

Correlation Coefficient

Sony  El Puerto

Excellent diversification

The 3 months correlation between Sony and LIVEPOL1 is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and El Puerto de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Puerto de 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 El Puerto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Puerto de has no effect on the direction of Sony i.e., Sony and El Puerto go up and down completely randomly.

Pair Corralation between Sony and El Puerto

Assuming the 90 days trading horizon Sony Group is expected to generate 1.9 times more return on investment than El Puerto. However, Sony is 1.9 times more volatile than El Puerto de. It trades about 0.19 of its potential returns per unit of risk. El Puerto de is currently generating about -0.15 per unit of risk. If you would invest  36,400  in Sony Group on September 12, 2024 and sell it today you would earn a total of  7,800  from holding Sony Group or generate 21.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Sony Group  vs.  El Puerto de

Sony Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 14 (%) 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.

El Puerto de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Puerto de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Sony and El Puerto

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

The idea behind Sony Group and El Puerto de 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.