Correlation Between Nasdaq and Sony

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

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

Diversification Opportunities for Nasdaq and Sony

-0.19

Correlation Coefficient

Nasdaq  Sony

Good diversification

The 3 months correlation between Nasdaq and Sony is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Sony Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group and Nasdaq 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 Nasdaq 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 Nasdaq i.e., Nasdaq and Sony go up and down completely randomly.

Pair Corralation between Nasdaq and Sony

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Sony. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.25 times less risky than Sony. The stock trades about -0.03 of its potential returns per unit of risk. The Sony Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  13,003  in Sony Group on December 29, 2024 and sell it today you would earn a total of  1,561  from holding Sony Group or generate 12.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nasdaq Inc  vs.  Sony Group

Nasdaq Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Sony Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Sony sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Sony

The main advantage of trading using opposite Nasdaq and Sony positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..