Correlation Between Sony Group and Columbia Sportswear

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

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

Diversification Opportunities for Sony Group and Columbia Sportswear

0.89

Correlation Coefficient

Sony Group  Columbia Sportswear

Very poor diversification

The 3 months correlation between Sony and Columbia is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group Corp and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear and Sony Group 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 Corp are associated (or correlated) with Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Sony Group i.e., Sony Group and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Sony Group and Columbia Sportswear

Assuming the 90 days trading horizon Sony Group Corp is expected to generate 1.01 times more return on investment than Columbia Sportswear. However, Sony Group is 1.01 times more volatile than Columbia Sportswear. It trades about 0.16 of its potential returns per unit of risk. Columbia Sportswear is currently generating about 0.08 per unit of risk. If you would invest  1,720  in Sony Group Corp on October 7, 2024 and sell it today you would earn a total of  320.00  from holding Sony Group Corp or generate 18.6% return on investment over 90 days.

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

Sony Group Corp  vs.  Columbia Sportswear

Sony Group Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sony Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Columbia Sportswear

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Columbia Sportswear may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sony Group and Columbia Sportswear

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

The idea behind Sony Group Corp and Columbia Sportswear 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.