Correlation Between Sony and Jefferies Financial

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

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

Diversification Opportunities for Sony and Jefferies Financial

0.87

Correlation Coefficient

Sony  Jefferies Financial

Very poor diversification

The 3 months correlation between Sony and Jefferies is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Jefferies Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jefferies Financial 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 Jefferies Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jefferies Financial has no effect on the direction of Sony i.e., Sony and Jefferies Financial go up and down completely randomly.

Pair Corralation between Sony and Jefferies Financial

Assuming the 90 days trading horizon Sony Group is expected to generate 12.38 times more return on investment than Jefferies Financial. However, Sony is 12.38 times more volatile than Jefferies Financial Group. It trades about 0.07 of its potential returns per unit of risk. Jefferies Financial Group is currently generating about 0.15 per unit of risk. If you would invest  7,963  in Sony Group on October 8, 2024 and sell it today you would earn a total of  5,055  from holding Sony Group or generate 63.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.31%
Values	Daily Returns

Sony Group  vs.  Jefferies Financial Group

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.

Jefferies Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jefferies Financial Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Jefferies Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sony and Jefferies Financial

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

The idea behind Sony Group and Jefferies Financial 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.