Correlation Between Zepp Health and Sony Group

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

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

Diversification Opportunities for Zepp Health and Sony Group

-0.47

Correlation Coefficient

Zepp Health  Sony Group

Very good diversification

The 3 months correlation between Zepp and Sony is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Zepp Health Corp 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 Zepp Health 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 Zepp Health Corp 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 Zepp Health i.e., Zepp Health and Sony Group go up and down completely randomly.

Pair Corralation between Zepp Health and Sony Group

Given the investment horizon of 90 days Zepp Health Corp is expected to generate 2.95 times more return on investment than Sony Group. However, Zepp Health is 2.95 times more volatile than Sony Group Corp. It trades about 0.05 of its potential returns per unit of risk. Sony Group Corp is currently generating about 0.11 per unit of risk. If you would invest  240.00  in Zepp Health Corp on September 29, 2024 and sell it today you would earn a total of  38.00  from holding Zepp Health Corp or generate 15.83% return on investment over 90 days.

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

Zepp Health Corp  vs.  Sony Group Corp

Zepp Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zepp Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Sony Group Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Sony Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zepp Health and Sony Group

The main advantage of trading using opposite Zepp Health and Sony Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zepp Health 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 Zepp Health Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.