Correlation Between Sony and Nomura Holdings
Can any of the company-specific risk be diversified away by investing in both Sony and Nomura Holdings 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 Nomura Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sony Group and Nomura Holdings, you can compare the effects of market volatilities on Sony and Nomura Holdings 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 Nomura Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sony and Nomura Holdings.
Diversification Opportunities for Sony and Nomura Holdings
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sony and Nomura is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Nomura Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings 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 Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings has no effect on the direction of Sony i.e., Sony and Nomura Holdings go up and down completely randomly.
Pair Corralation between Sony and Nomura Holdings
Assuming the 90 days trading horizon Sony is expected to generate 1.7 times less return on investment than Nomura Holdings. In addition to that, Sony is 1.12 times more volatile than Nomura Holdings. It trades about 0.19 of its total potential returns per unit of risk. Nomura Holdings is currently generating about 0.35 per unit of volatility. If you would invest 2,997 in Nomura Holdings on August 26, 2024 and sell it today you would earn a total of 533.00 from holding Nomura Holdings or generate 17.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sony Group vs. Nomura Holdings
Performance |
| Timeline |
| Sony Group |
| Nomura Holdings |
Sony and Nomura Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sony and Nomura Holdings
The main advantage of trading using opposite Sony and Nomura Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sony position performs unexpectedly, Nomura Holdings 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 Nomura Holdings will offset losses from the drop in Nomura Holdings' long position.The idea behind Sony Group and Nomura Holdings 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.| Nomura Holdings vs. Waste Management | Nomura Holdings vs. METISA Metalrgica Timboense | Nomura Holdings vs. New Oriental Education | Nomura Holdings vs. Micron Technology |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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