Correlation Between Sony and Banco Santander

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

By analyzing existing cross correlation between Sony Group and Banco Santander Chile, you can compare the effects of market volatilities on Sony and Banco Santander 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 Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sony and Banco Santander.

Diversification Opportunities for Sony and Banco Santander

0.43

Correlation Coefficient

Sony  Banco Santander

Very weak diversification

The 3 months correlation between Sony and Banco is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Banco Santander Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Chile 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander Chile has no effect on the direction of Sony i.e., Sony and Banco Santander go up and down completely randomly.

Pair Corralation between Sony and Banco Santander

Assuming the 90 days trading horizon Sony Group is expected to generate 25.03 times more return on investment than Banco Santander. However, Sony is 25.03 times more volatile than Banco Santander Chile. It trades about 0.07 of its potential returns per unit of risk. Banco Santander Chile is currently generating about 0.07 per unit of risk. If you would invest  8,670  in Sony Group on October 5, 2024 and sell it today you would earn a total of  4,290  from holding Sony Group or generate 49.48% return on investment over 90 days.

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

Sony Group  vs.  Banco Santander Chile

Sony Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 14 (%) 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.

Banco Santander Chile

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Chile are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Banco Santander may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sony and Banco Santander

The main advantage of trading using opposite Sony and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sony position performs unexpectedly, Banco Santander 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 Banco Santander will offset losses from the drop in Banco Santander's long position.

The idea behind Sony Group and Banco Santander Chile 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.