Correlation Between Wearable Devices and Sony Group

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

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

Diversification Opportunities for Wearable Devices and Sony Group

-0.36

Correlation Coefficient

Wearable Devices  Sony Group

Very good diversification

The 3 months correlation between Wearable and Sony is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Wearable Devices and Sony Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group Corp and Wearable Devices 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 Wearable Devices are associated (or correlated) with Sony Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sony Group Corp has no effect on the direction of Wearable Devices i.e., Wearable Devices and Sony Group go up and down completely randomly.

Pair Corralation between Wearable Devices and Sony Group

Assuming the 90 days horizon Wearable Devices is expected to generate 142.58 times more return on investment than Sony Group. However, Wearable Devices is 142.58 times more volatile than Sony Group Corp. It trades about 0.27 of its potential returns per unit of risk. Sony Group Corp is currently generating about 0.05 per unit of risk. If you would invest  0.14  in Wearable Devices on September 1, 2024 and sell it today you would earn a total of  25.86  from holding Wearable Devices or generate 18471.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.13%
Values	Daily Returns

Wearable Devices  vs.  Sony Group Corp

Wearable Devices

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wearable Devices are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Wearable Devices showed solid returns over the last few months and may actually be approaching a breakup point.

Sony Group Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group Corp are ranked lower than 3 (%) 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.

Pair Trading with Wearable Devices and Sony Group

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

The idea behind Wearable Devices and Sony Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.