Correlation Between Sony and DeVry Education

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

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

Diversification Opportunities for Sony and DeVry Education

0.77

Correlation Coefficient

Sony  DeVry Education

Poor diversification

The 3 months correlation between Sony and DeVry is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and DeVry Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeVry Education Group 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 DeVry Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeVry Education Group has no effect on the direction of Sony i.e., Sony and DeVry Education go up and down completely randomly.

Pair Corralation between Sony and DeVry Education

Assuming the 90 days trading horizon Sony is expected to generate 1.49 times less return on investment than DeVry Education. In addition to that, Sony is 1.17 times more volatile than DeVry Education Group. It trades about 0.13 of its total potential returns per unit of risk. DeVry Education Group is currently generating about 0.23 per unit of volatility. If you would invest  6,700  in DeVry Education Group on October 26, 2024 and sell it today you would earn a total of  2,800  from holding DeVry Education Group or generate 41.79% return on investment over 90 days.

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

Sony Group  vs.  DeVry Education Group

Sony Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sony reported solid returns over the last few months and may actually be approaching a breakup point.

DeVry Education Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DeVry Education Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DeVry Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sony and DeVry Education

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

The idea behind Sony Group and DeVry Education 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.