Correlation Between Wearable Devices and Sonos

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

By analyzing existing cross correlation between Wearable Devices and Sonos Inc, you can compare the effects of market volatilities on Wearable Devices and Sonos 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 Wearable Devices with a short position of Sonos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wearable Devices and Sonos.

Diversification Opportunities for Wearable Devices and Sonos

0.0

Correlation Coefficient

Wearable Devices  Sonos

Pay attention - limited upside

The 3 months correlation between Wearable and Sonos is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wearable Devices and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and Wearable Devices 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 Wearable Devices are associated (or correlated) with Sonos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonos Inc has no effect on the direction of Wearable Devices i.e., Wearable Devices and Sonos go up and down completely randomly.

Pair Corralation between Wearable Devices and Sonos

Assuming the 90 days horizon Wearable Devices is expected to under-perform the Sonos. In addition to that, Wearable Devices is 10.47 times more volatile than Sonos Inc. It trades about -0.06 of its total potential returns per unit of risk. Sonos Inc is currently generating about -0.32 per unit of volatility. If you would invest  1,879  in Sonos Inc on January 30, 2024 and sell it today you would lose (182.00) from holding Sonos Inc or give up 9.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	68.18%
Values	Daily Returns

Wearable Devices  vs.  Sonos Inc

Wearable Devices

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wearable Devices are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Wearable Devices showed solid returns over the last few months and may actually be approaching a breakup point.

Sonos Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sonos may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Wearable Devices and Sonos

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

The idea behind Wearable Devices and Sonos Inc 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.