Correlation Between Butterfly Network and SoundHound

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

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

Diversification Opportunities for Butterfly Network and SoundHound

0.33

Correlation Coefficient

Butterfly Network  SoundHound

Weak diversification

The 3 months correlation between Butterfly and SoundHound is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and SoundHound AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoundHound AI and Butterfly Network 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 Butterfly Network are associated (or correlated) with SoundHound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoundHound AI has no effect on the direction of Butterfly Network i.e., Butterfly Network and SoundHound go up and down completely randomly.

Pair Corralation between Butterfly Network and SoundHound

Given the investment horizon of 90 days Butterfly Network is expected to generate 0.93 times more return on investment than SoundHound. However, Butterfly Network is 1.08 times less risky than SoundHound. It trades about -0.04 of its potential returns per unit of risk. SoundHound AI is currently generating about -0.17 per unit of risk. If you would invest  323.00  in Butterfly Network on December 30, 2024 and sell it today you would lose (86.00) from holding Butterfly Network or give up 26.63% of portfolio value over 90 days.

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

Butterfly Network  vs.  SoundHound AI

Butterfly Network

Risk-Adjusted Performance

Very Weak

Over the last 90 days Butterfly Network has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SoundHound AI

Risk-Adjusted Performance

Very Weak

Over the last 90 days SoundHound AI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Butterfly Network and SoundHound

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

The idea behind Butterfly Network and SoundHound AI 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.