Correlation Between Radcom and Sonos

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

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

Diversification Opportunities for Radcom and Sonos

-0.26

Correlation Coefficient

Radcom  Sonos

Very good diversification

The 3 months correlation between Radcom and Sonos is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and Radcom 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 Radcom 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 Radcom i.e., Radcom and Sonos go up and down completely randomly.

Pair Corralation between Radcom and Sonos

Given the investment horizon of 90 days Radcom is expected to under-perform the Sonos. In addition to that, Radcom is 1.28 times more volatile than Sonos Inc. It trades about -0.12 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  1,357  in Sonos Inc on December 4, 2024 and sell it today you would lose (74.50) from holding Sonos Inc or give up 5.49% of portfolio value over 90 days.

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

Radcom  vs.  Sonos Inc

Radcom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Radcom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Radcom is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sonos Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonos Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Radcom and Sonos

The main advantage of trading using opposite Radcom and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radcom 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 Radcom 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.