Correlation Between Sony and MAHLE Metal

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

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

Diversification Opportunities for Sony and MAHLE Metal

-0.84

Correlation Coefficient

Sony  MAHLE Metal

Pay attention - limited upside

The 3 months correlation between Sony and MAHLE is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and MAHLE Metal Leve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAHLE Metal Leve 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 MAHLE Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAHLE Metal Leve has no effect on the direction of Sony i.e., Sony and MAHLE Metal go up and down completely randomly.

Pair Corralation between Sony and MAHLE Metal

Assuming the 90 days trading horizon Sony Group is expected to generate 1.01 times more return on investment than MAHLE Metal. However, Sony is 1.01 times more volatile than MAHLE Metal Leve. It trades about 0.11 of its potential returns per unit of risk. MAHLE Metal Leve is currently generating about -0.15 per unit of risk. If you would invest  12,584  in Sony Group on October 6, 2024 and sell it today you would earn a total of  434.00  from holding Sony Group or generate 3.45% return on investment over 90 days.

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

Sony Group  vs.  MAHLE Metal Leve

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.

MAHLE Metal Leve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAHLE Metal Leve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sony and MAHLE Metal

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

The idea behind Sony Group and MAHLE Metal Leve 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.