Correlation Between Sony and Exxon

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

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

Diversification Opportunities for Sony and Exxon

-0.74

Correlation Coefficient

Sony  Exxon

Pay attention - limited upside

The 3 months correlation between Sony and Exxon is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of Sony i.e., Sony and Exxon go up and down completely randomly.

Pair Corralation between Sony and Exxon

Assuming the 90 days trading horizon Sony Group is expected to generate 1.14 times more return on investment than Exxon. However, Sony is 1.14 times more volatile than Exxon Mobil. It trades about 0.17 of its potential returns per unit of risk. Exxon Mobil is currently generating about -0.01 per unit of risk. If you would invest  35,900  in Sony Group on October 22, 2024 and sell it today you would earn a total of  6,600  from holding Sony Group or generate 18.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Sony Group  vs.  Exxon Mobil

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.

Exxon Mobil

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sony and Exxon

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

The idea behind Sony Group and Exxon Mobil 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.