Correlation Between China Gas and Sonos

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

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

Diversification Opportunities for China Gas and Sonos

-0.24

Correlation Coefficient

China Gas  Sonos

Very good diversification

The 3 months correlation between China and Sonos is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding China Gas Holdings and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and China Gas 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 China Gas Holdings 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 China Gas i.e., China Gas and Sonos go up and down completely randomly.

Pair Corralation between China Gas and Sonos

Assuming the 90 days horizon China Gas Holdings is expected to under-perform the Sonos. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Gas Holdings is 2.01 times less risky than Sonos. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Sonos Inc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,488  in Sonos Inc on October 10, 2024 and sell it today you would lose (13.00) from holding Sonos Inc or give up 0.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

China Gas Holdings  vs.  Sonos Inc

China Gas Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Gas Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sonos Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sonos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Gas and Sonos

The main advantage of trading using opposite China Gas and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Gas 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 China Gas Holdings 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..