Correlation Between Sony and Apple

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

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

Diversification Opportunities for Sony and Apple

0.85

Correlation Coefficient

Sony  Apple

Very poor diversification

The 3 months correlation between Sony and Apple is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Sony i.e., Sony and Apple go up and down completely randomly.

Pair Corralation between Sony and Apple

Assuming the 90 days trading horizon Sony is expected to generate 1.65 times less return on investment than Apple. In addition to that, Sony is 1.51 times more volatile than Apple Inc. It trades about 0.05 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.11 per unit of volatility. If you would invest  11,742  in Apple Inc on September 26, 2024 and sell it today you would earn a total of  12,808  from holding Apple Inc or generate 109.08% return on investment over 90 days.

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

Sony Group  vs.  Apple Inc

Sony Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sony reported solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Apple reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sony and Apple

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

The idea behind Sony Group and Apple Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.