Correlation Between Sony and Vanguard World

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

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

Diversification Opportunities for Sony and Vanguard World

-0.78

Correlation Coefficient

Sony  Vanguard World

Pay attention - limited upside

The 3 months correlation between Sony and Vanguard is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World 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 Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of Sony i.e., Sony and Vanguard World go up and down completely randomly.

Pair Corralation between Sony and Vanguard World

Assuming the 90 days trading horizon Sony Group is expected to under-perform the Vanguard World. In addition to that, Sony is 2.59 times more volatile than Vanguard World. It trades about -0.05 of its total potential returns per unit of risk. Vanguard World is currently generating about 0.41 per unit of volatility. If you would invest  520,900  in Vanguard World on October 22, 2024 and sell it today you would earn a total of  17,600  from holding Vanguard World or generate 3.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Sony Group  vs.  Vanguard World

Sony Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 13 (%) 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.

Vanguard World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vanguard World is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sony and Vanguard World

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

The idea behind Sony Group and Vanguard World 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.