Correlation Between IDP EDUCATION and Sony

Can any of the company-specific risk be diversified away by investing in both IDP EDUCATION 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 IDP EDUCATION and Sony into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IDP EDUCATION LTD and Sony Group, you can compare the effects of market volatilities on IDP EDUCATION 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 IDP EDUCATION with a short position of Sony. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDP EDUCATION and Sony.

Diversification Opportunities for IDP EDUCATION and Sony

-0.82

Correlation Coefficient

IDP EDUCATION  Sony

Pay attention - limited upside

The 3 months correlation between IDP and Sony is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding IDP EDUCATION LTD and Sony Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group and IDP EDUCATION 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 IDP EDUCATION LTD 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 IDP EDUCATION i.e., IDP EDUCATION and Sony go up and down completely randomly.

Pair Corralation between IDP EDUCATION and Sony

Assuming the 90 days horizon IDP EDUCATION LTD is expected to under-perform the Sony. In addition to that, IDP EDUCATION is 2.32 times more volatile than Sony Group. It trades about -0.03 of its total potential returns per unit of risk. Sony Group is currently generating about 0.02 per unit of volatility. If you would invest  1,970  in Sony Group on October 26, 2024 and sell it today you would earn a total of  10.00  from holding Sony Group or generate 0.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

IDP EDUCATION LTD  vs.  Sony Group

IDP EDUCATION LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDP EDUCATION LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IDP EDUCATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sony Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sony reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IDP EDUCATION and Sony

The main advantage of trading using opposite IDP EDUCATION and Sony positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDP EDUCATION 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.

The idea behind IDP EDUCATION LTD and Sony Group 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.