Correlation Between Zoom Video and Sony

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

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

Diversification Opportunities for Zoom Video and Sony

0.8

Correlation Coefficient

Zoom Video  Sony

Very poor diversification

The 3 months correlation between Zoom and Sony is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Sony Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group and Zoom Video 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 Zoom Video Communications 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 Zoom Video i.e., Zoom Video and Sony go up and down completely randomly.

Pair Corralation between Zoom Video and Sony

Assuming the 90 days trading horizon Zoom Video is expected to generate 7.5 times less return on investment than Sony. In addition to that, Zoom Video is 1.14 times more volatile than Sony Group. It trades about 0.04 of its total potential returns per unit of risk. Sony Group is currently generating about 0.38 per unit of volatility. If you would invest  11,323  in Sony Group on September 25, 2024 and sell it today you would earn a total of  1,842  from holding Sony Group or generate 16.27% return on investment over 90 days.

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

Zoom Video Communications  vs.  Sony Group

Zoom Video Communications

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoom Video sustained solid returns over the last few months and may actually be approaching a breakup point.

Sony Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Sony sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zoom Video and Sony

The main advantage of trading using opposite Zoom Video and Sony positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video 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 Zoom Video Communications 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.

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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 Stocks Directory module to find actively traded stocks across global markets.