Correlation Between GoPro and Sony

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

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

Diversification Opportunities for GoPro and Sony

-0.08

Correlation Coefficient

GoPro  Sony

Good diversification

The 3 months correlation between GoPro and Sony is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding GoPro Inc and Sony Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group and GoPro 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 GoPro Inc 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 GoPro i.e., GoPro and Sony go up and down completely randomly.

Pair Corralation between GoPro and Sony

Assuming the 90 days trading horizon GoPro Inc is expected to under-perform the Sony. But the stock apears to be less risky and, when comparing its historical volatility, GoPro Inc is 16.0 times less risky than Sony. The stock trades about -0.07 of its potential returns per unit of risk. The Sony Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,736  in Sony Group on September 23, 2024 and sell it today you would earn a total of  5,126  from holding Sony Group or generate 66.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

GoPro Inc  vs.  Sony Group

GoPro Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoPro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GoPro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sony Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Sony sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GoPro and Sony

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

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.