Correlation Between Sony and Nucor

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

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

Diversification Opportunities for Sony and Nucor

0.3

Correlation Coefficient

Sony  Nucor

Weak diversification

The 3 months correlation between Sony and Nucor is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor 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 Nucor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor has no effect on the direction of Sony i.e., Sony and Nucor go up and down completely randomly.

Pair Corralation between Sony and Nucor

Assuming the 90 days trading horizon Sony Group is expected to generate 0.88 times more return on investment than Nucor. However, Sony Group is 1.14 times less risky than Nucor. It trades about 0.11 of its potential returns per unit of risk. Nucor is currently generating about -0.03 per unit of risk. If you would invest  13,066  in Sony Group on December 24, 2024 and sell it today you would earn a total of  1,442  from holding Sony Group or generate 11.04% return on investment over 90 days.

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

Sony Group  vs.  Nucor

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nucor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nucor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nucor is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sony and Nucor

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

The idea behind Sony Group and Nucor 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.