Correlation Between Sony Group and Zepp Health

Can any of the company-specific risk be diversified away by investing in both Sony Group and Zepp Health 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 Zepp Health 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 Zepp Health Corp, you can compare the effects of market volatilities on Sony Group and Zepp Health 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 Zepp Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sony Group and Zepp Health.

Diversification Opportunities for Sony Group and Zepp Health

-0.47

Correlation Coefficient

Sony Group  Zepp Health

Very good diversification

The 3 months correlation between Sony and Zepp is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group Corp and Zepp Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zepp Health Corp 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 Zepp Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zepp Health Corp has no effect on the direction of Sony Group i.e., Sony Group and Zepp Health go up and down completely randomly.

Pair Corralation between Sony Group and Zepp Health

Given the investment horizon of 90 days Sony Group is expected to generate 1.34 times less return on investment than Zepp Health. But when comparing it to its historical volatility, Sony Group Corp is 2.95 times less risky than Zepp Health. It trades about 0.11 of its potential returns per unit of risk. Zepp Health Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  240.00  in Zepp Health Corp on September 29, 2024 and sell it today you would earn a total of  38.00  from holding Zepp Health Corp or generate 15.83% return on investment over 90 days.

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

Sony Group Corp  vs.  Zepp Health Corp

Sony Group Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Sony Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zepp Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zepp Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Sony Group and Zepp Health

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

The idea behind Sony Group Corp and Zepp Health 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.