Correlation Between Sony and Bicicletas Monark

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

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

Diversification Opportunities for Sony and Bicicletas Monark

0.47

Correlation Coefficient

Sony  Bicicletas Monark

Very weak diversification

The 3 months correlation between Sony and Bicicletas is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Bicicletas Monark SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bicicletas Monark 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 Bicicletas Monark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bicicletas Monark has no effect on the direction of Sony i.e., Sony and Bicicletas Monark go up and down completely randomly.

Pair Corralation between Sony and Bicicletas Monark

Assuming the 90 days trading horizon Sony Group is expected to generate 0.76 times more return on investment than Bicicletas Monark. However, Sony Group is 1.32 times less risky than Bicicletas Monark. It trades about 0.19 of its potential returns per unit of risk. Bicicletas Monark SA is currently generating about 0.12 per unit of risk. If you would invest  12,113  in Sony Group on December 1, 2024 and sell it today you would earn a total of  2,557  from holding Sony Group or generate 21.11% 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.  Bicicletas Monark SA

Sony Group

Risk-Adjusted Performance

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.

Bicicletas Monark

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bicicletas Monark SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bicicletas Monark unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sony and Bicicletas Monark

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

The idea behind Sony Group and Bicicletas Monark SA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.