Correlation Between Sony and FibraHotel
Can any of the company-specific risk be diversified away by investing in both Sony and FibraHotel 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 FibraHotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sony Group and FibraHotel, you can compare the effects of market volatilities on Sony and FibraHotel 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 FibraHotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sony and FibraHotel.
Diversification Opportunities for Sony and FibraHotel
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sony and FibraHotel is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel 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 FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Sony i.e., Sony and FibraHotel go up and down completely randomly.
Pair Corralation between Sony and FibraHotel
Assuming the 90 days trading horizon Sony Group is expected to generate 0.89 times more return on investment than FibraHotel. However, Sony Group is 1.13 times less risky than FibraHotel. It trades about 0.34 of its potential returns per unit of risk. FibraHotel is currently generating about 0.01 per unit of risk. If you would invest 35,476 in Sony Group on September 2, 2024 and sell it today you would earn a total of 5,324 from holding Sony Group or generate 15.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Sony Group vs. FibraHotel
Performance |
| Timeline |
| Sony Group |
| FibraHotel |
Sony and FibraHotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sony and FibraHotel
The main advantage of trading using opposite Sony and FibraHotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sony position performs unexpectedly, FibraHotel 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 FibraHotel will offset losses from the drop in FibraHotel's long position.The idea behind Sony Group and FibraHotel 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.| FibraHotel vs. Lloyds Banking Group | FibraHotel vs. United States Steel | FibraHotel vs. Capital One Financial | FibraHotel 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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