Correlation Between Inspired Entertainment and Sonder Holdings

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

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

Diversification Opportunities for Inspired Entertainment and Sonder Holdings

0.41

Correlation Coefficient

Inspired Entertainment  Sonder Holdings

Very weak diversification

The 3 months correlation between Inspired and Sonder is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Inspired Entertainment and Sonder Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonder Holdings and Inspired Entertainment 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 Inspired Entertainment are associated (or correlated) with Sonder Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonder Holdings has no effect on the direction of Inspired Entertainment i.e., Inspired Entertainment and Sonder Holdings go up and down completely randomly.

Pair Corralation between Inspired Entertainment and Sonder Holdings

Given the investment horizon of 90 days Inspired Entertainment is expected to generate 99.89 times less return on investment than Sonder Holdings. But when comparing it to its historical volatility, Inspired Entertainment is 4.56 times less risky than Sonder Holdings. It trades about 0.0 of its potential returns per unit of risk. Sonder Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.62  in Sonder Holdings on December 29, 2024 and sell it today you would earn a total of  0.13  from holding Sonder Holdings or generate 20.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.8%
Values	Daily Returns

Inspired Entertainment  vs.  Sonder Holdings

Inspired Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inspired Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Inspired Entertainment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sonder Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sonder Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Sonder Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspired Entertainment and Sonder Holdings

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

The idea behind Inspired Entertainment and Sonder Holdings 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.