Correlation Between Definitive Healthcare and Sonos

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

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

Diversification Opportunities for Definitive Healthcare and Sonos

0.17

Correlation Coefficient

Definitive Healthcare  Sonos

Average diversification

The 3 months correlation between Definitive and Sonos is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and Definitive Healthcare 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 Definitive Healthcare Corp 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 Definitive Healthcare i.e., Definitive Healthcare and Sonos go up and down completely randomly.

Pair Corralation between Definitive Healthcare and Sonos

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to under-perform the Sonos. In addition to that, Definitive Healthcare is 1.62 times more volatile than Sonos Inc. It trades about -0.23 of its total potential returns per unit of risk. Sonos Inc is currently generating about 0.06 per unit of volatility. If you would invest  1,452  in Sonos Inc on October 11, 2024 and sell it today you would earn a total of  23.00  from holding Sonos Inc or generate 1.58% return on investment over 90 days.

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

Definitive Healthcare Corp  vs.  Sonos Inc

Definitive Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Definitive Healthcare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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 Definitive Healthcare and Sonos

The main advantage of trading using opposite Definitive Healthcare and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definitive Healthcare 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 Definitive Healthcare Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.