Correlation Between Sonos and Sony Corp

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

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

Diversification Opportunities for Sonos and Sony Corp

-0.32

Correlation Coefficient

Sonos  Sony Corp

Very good diversification

The 3 months correlation between Sonos and Sony is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Sony Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Corp and Sonos 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 Sonos Inc are associated (or correlated) with Sony Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sony Corp has no effect on the direction of Sonos i.e., Sonos and Sony Corp go up and down completely randomly.

Pair Corralation between Sonos and Sony Corp

Given the investment horizon of 90 days Sonos is expected to generate 24.98 times less return on investment than Sony Corp. But when comparing it to its historical volatility, Sonos Inc is 1.2 times less risky than Sony Corp. It trades about 0.01 of its potential returns per unit of risk. Sony Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,000  in Sony Corp on November 28, 2024 and sell it today you would earn a total of  500.00  from holding Sony Corp or generate 25.0% return on investment over 90 days.

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

Sonos Inc  vs.  Sony Corp

Sonos Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonos Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sonos is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Sony Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting forward-looking indicators, Sony Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonos and Sony Corp

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

The idea behind Sonos Inc and Sony Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.