Correlation Between Sony and Alupar Investimento

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

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

Diversification Opportunities for Sony and Alupar Investimento

-0.39

Correlation Coefficient

Sony  Alupar Investimento

Very good diversification

The 3 months correlation between Sony and Alupar is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group and Alupar Investimento SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alupar Investimento 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 Alupar Investimento. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alupar Investimento has no effect on the direction of Sony i.e., Sony and Alupar Investimento go up and down completely randomly.

Pair Corralation between Sony and Alupar Investimento

Assuming the 90 days trading horizon Sony is expected to generate 7.13 times less return on investment than Alupar Investimento. But when comparing it to its historical volatility, Sony Group is 1.24 times less risky than Alupar Investimento. It trades about 0.01 of its potential returns per unit of risk. Alupar Investimento SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  746.00  in Alupar Investimento SA on February 15, 2024 and sell it today you would earn a total of  249.00  from holding Alupar Investimento SA or generate 33.38% return on investment over 90 days.

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

Sony Group  vs.  Alupar Investimento SA

Sony Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sony Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alupar Investimento

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alupar Investimento SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alupar Investimento may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Sony and Alupar Investimento

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

The idea behind Sony Group and Alupar Investimento SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.