Correlation Between Sony Group and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both Sony Group and Nippon Steel 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 Group and Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sony Group Corp and Nippon Steel, you can compare the effects of market volatilities on Sony Group and Nippon Steel 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 Group with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sony Group and Nippon Steel.
Diversification Opportunities for Sony Group and Nippon Steel
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sony and Nippon is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group Corp and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and Sony Group 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 Corp are associated (or correlated) with Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of Sony Group i.e., Sony Group and Nippon Steel go up and down completely randomly.
Pair Corralation between Sony Group and Nippon Steel
Assuming the 90 days trading horizon Sony Group Corp is expected to generate 3.27 times more return on investment than Nippon Steel. However, Sony Group is 3.27 times more volatile than Nippon Steel. It trades about 0.07 of its potential returns per unit of risk. Nippon Steel is currently generating about 0.03 per unit of risk. If you would invest 337.00 in Sony Group Corp on August 25, 2024 and sell it today you would earn a total of 1,483 from holding Sony Group Corp or generate 440.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Sony Group Corp vs. Nippon Steel
Performance |
| Timeline |
| Sony Group Corp |
| Nippon Steel |
Sony Group and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sony Group and Nippon Steel
The main advantage of trading using opposite Sony Group and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sony Group position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel's long position.| Sony Group vs. Amazon Inc | Sony Group vs. Microsoft | Sony Group vs. Tesla Inc | Sony Group vs. Alphabet Class A |
| Nippon Steel vs. GigaMedia | Nippon Steel vs. Flutter Entertainment PLC | Nippon Steel vs. Taiwan Semiconductor Manufacturing | Nippon Steel vs. Tower Semiconductor |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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