Correlation Between Alphabet and Sony
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and Sony into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class A and Sony Group, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Sony. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Sony.
Diversification Opportunities for Alphabet and Sony
Poor diversification
The 3 months correlation between Alphabet and Sony is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and Sony Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group and Alphabet 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 Alphabet Inc Class A 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 Alphabet i.e., Alphabet and Sony go up and down completely randomly.
Pair Corralation between Alphabet and Sony
Assuming the 90 days trading horizon Alphabet is expected to generate 1.38 times less return on investment than Sony. In addition to that, Alphabet is 1.55 times more volatile than Sony Group. It trades about 0.22 of its total potential returns per unit of risk. Sony Group is currently generating about 0.47 per unit of volatility. If you would invest 38,200 in Sony Group on September 19, 2024 and sell it today you would earn a total of 5,700 from holding Sony Group or generate 14.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet Inc Class A vs. Sony Group
Performance |
| Timeline |
| Alphabet Class A |
| Sony Group |
Alphabet and Sony Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Sony
The main advantage of trading using opposite Alphabet and Sony positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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.| Alphabet vs. Baidu Inc | Alphabet vs. The Select Sector | Alphabet vs. Promotora y Operadora | Alphabet vs. iShares Global Timber |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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