Correlation Between Lincoln Educational and Sonos

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

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

Diversification Opportunities for Lincoln Educational and Sonos

0.86

Correlation Coefficient

Lincoln Educational  Sonos

Very poor diversification

The 3 months correlation between Lincoln and Sonos is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Educational Services and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and Lincoln Educational 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 Lincoln Educational Services 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 Lincoln Educational i.e., Lincoln Educational and Sonos go up and down completely randomly.

Pair Corralation between Lincoln Educational and Sonos

Given the investment horizon of 90 days Lincoln Educational Services is expected to generate 1.09 times more return on investment than Sonos. However, Lincoln Educational is 1.09 times more volatile than Sonos Inc. It trades about 0.16 of its potential returns per unit of risk. Sonos Inc is currently generating about 0.14 per unit of risk. If you would invest  1,194  in Lincoln Educational Services on September 30, 2024 and sell it today you would earn a total of  348.00  from holding Lincoln Educational Services or generate 29.15% return on investment over 90 days.

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

Lincoln Educational Services  vs.  Sonos Inc

Lincoln Educational

Risk-Adjusted Performance

12 of 100

Good

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

Sonos Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 11 (%) 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 Lincoln Educational and Sonos

The main advantage of trading using opposite Lincoln Educational and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Educational 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 Lincoln Educational Services 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.