Correlation Between Dow Jones and Sony
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Sony 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 Dow Jones and Sony into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Sony Group, you can compare the effects of market volatilities on Dow Jones and Sony 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 Dow Jones with a short position of Sony. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Sony.
Diversification Opportunities for Dow Jones and Sony
Weak diversification
The 3 months correlation between Dow and Sony is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Sony Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Sony. 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 has no effect on the direction of Dow Jones i.e., Dow Jones and Sony go up and down completely randomly.
Pair Corralation between Dow Jones and Sony
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.02 times less return on investment than Sony. But when comparing it to its historical volatility, Dow Jones Industrial is 2.3 times less risky than Sony. It trades about 0.29 of its potential returns per unit of risk. Sony Group is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 36,489 in Sony Group on August 31, 2024 and sell it today you would earn a total of 4,311 from holding Sony Group or generate 11.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Sony Group
Performance |
| Timeline |
Dow Jones and Sony Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Sony Group
Pair trading matchups for Sony
Pair Trading with Dow Jones and Sony
The main advantage of trading using opposite Dow Jones and Sony positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Sony 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 will offset losses from the drop in Sony's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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