Correlation Between Sleep Number and MillerKnoll

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

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

Diversification Opportunities for Sleep Number and MillerKnoll

0.32

Correlation Coefficient

Sleep Number  MillerKnoll

Weak diversification

The 3 months correlation between Sleep and MillerKnoll is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sleep Number Corp and MillerKnoll in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MillerKnoll and Sleep Number 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 Sleep Number Corp are associated (or correlated) with MillerKnoll. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MillerKnoll has no effect on the direction of Sleep Number i.e., Sleep Number and MillerKnoll go up and down completely randomly.

Pair Corralation between Sleep Number and MillerKnoll

Given the investment horizon of 90 days Sleep Number Corp is expected to generate 3.5 times more return on investment than MillerKnoll. However, Sleep Number is 3.5 times more volatile than MillerKnoll. It trades about 0.1 of its potential returns per unit of risk. MillerKnoll is currently generating about 0.33 per unit of risk. If you would invest  1,370  in Sleep Number Corp on September 1, 2024 and sell it today you would earn a total of  130.00  from holding Sleep Number Corp or generate 9.49% return on investment over 90 days.

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

Sleep Number Corp  vs.  MillerKnoll

Sleep Number Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sleep Number Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, Sleep Number reported solid returns over the last few months and may actually be approaching a breakup point.

MillerKnoll

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MillerKnoll has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals 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 Sleep Number and MillerKnoll

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

The idea behind Sleep Number Corp and MillerKnoll 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.