Correlation Between Sony and Grupo Financiero

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

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

Diversification Opportunities for Sony and Grupo Financiero

0.58

Correlation Coefficient

Sony  Grupo Financiero

Very weak diversification

The 3 months correlation between Sony and Grupo is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Grupo Financiero Inbursa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Inbursa 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Inbursa has no effect on the direction of Sony i.e., Sony and Grupo Financiero go up and down completely randomly.

Pair Corralation between Sony and Grupo Financiero

Assuming the 90 days trading horizon Sony Group is expected to generate 0.86 times more return on investment than Grupo Financiero. However, Sony Group is 1.17 times less risky than Grupo Financiero. It trades about 0.49 of its potential returns per unit of risk. Grupo Financiero Inbursa is currently generating about 0.18 per unit of risk. If you would invest  38,200  in Sony Group on September 17, 2024 and sell it today you would earn a total of  5,700  from holding Sony Group or generate 14.92% return on investment over 90 days.

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

Sony Group  vs.  Grupo Financiero Inbursa

Sony Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Sony displayed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Financiero Inbursa

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Inbursa are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Grupo Financiero is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sony and Grupo Financiero

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

The idea behind Sony Group and Grupo Financiero Inbursa 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.