Correlation Between Carsales and Sony Group

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

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

Diversification Opportunities for Carsales and Sony Group

0.22

Correlation Coefficient

Carsales  Sony Group

Modest diversification

The 3 months correlation between Carsales and Sony is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Sony Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group Corp and Carsales 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 CarsalesCom are associated (or correlated) with Sony Group. 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 Corp has no effect on the direction of Carsales i.e., Carsales and Sony Group go up and down completely randomly.

Pair Corralation between Carsales and Sony Group

Assuming the 90 days horizon CarsalesCom is expected to under-perform the Sony Group. But the stock apears to be less risky and, when comparing its historical volatility, CarsalesCom is 1.5 times less risky than Sony Group. The stock trades about 0.0 of its potential returns per unit of risk. The Sony Group Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,732  in Sony Group Corp on October 8, 2024 and sell it today you would earn a total of  286.00  from holding Sony Group Corp or generate 16.51% return on investment over 90 days.

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

CarsalesCom  vs.  Sony Group Corp

CarsalesCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Carsales is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sony Group Corp

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Carsales and Sony Group

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

The idea behind CarsalesCom and Sony Group 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.