Correlation Between Sony and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Sony and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sony Group and Dow Jones Industrial, you can compare the effects of market volatilities on Sony and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sony and Dow Jones.
Diversification Opportunities for Sony and Dow Jones
Poor diversification
The 3 months correlation between Sony and Dow is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Sony i.e., Sony and Dow Jones go up and down completely randomly.
Pair Corralation between Sony and Dow Jones
Assuming the 90 days trading horizon Sony Group is expected to generate 2.64 times more return on investment than Dow Jones. However, Sony is 2.64 times more volatile than Dow Jones Industrial. It trades about 0.14 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 8,659 in Sony Group on September 1, 2024 and sell it today you would earn a total of 3,407 from holding Sony Group or generate 39.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Sony Group vs. Dow Jones Industrial
Performance |
| Timeline |
Sony and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Sony Group
Pair trading matchups for Sony
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Sony and Dow Jones
The main advantage of trading using opposite Sony and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sony position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Sony vs. Apartment Investment and | Sony vs. Fidelity National Information | Sony vs. Micron Technology | Sony vs. Ross Stores |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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