Correlation Between US Physical and Sony

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

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

Diversification Opportunities for US Physical and Sony

0.45

Correlation Coefficient

US Physical  Sony

Very weak diversification

The 3 months correlation between UPH and Sony is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding US Physical Therapy and Sony Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group and US Physical 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 US Physical Therapy are associated (or correlated) with Sony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sony Group has no effect on the direction of US Physical i.e., US Physical and Sony go up and down completely randomly.

Pair Corralation between US Physical and Sony

Assuming the 90 days horizon US Physical is expected to generate 1.5 times less return on investment than Sony. But when comparing it to its historical volatility, US Physical Therapy is 1.23 times less risky than Sony. It trades about 0.11 of its potential returns per unit of risk. Sony Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,580  in Sony Group on October 26, 2024 and sell it today you would earn a total of  390.00  from holding Sony Group or generate 24.68% return on investment over 90 days.

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

US Physical Therapy  vs.  Sony Group

US Physical Therapy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Physical Therapy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, US Physical reported solid returns over the last few months and may actually be approaching a breakup point.

Sony Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sony reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Physical and Sony

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

The idea behind US Physical Therapy and Sony Group 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.