Correlation Between Sleep Number and Whirlpool

Can any of the company-specific risk be diversified away by investing in both Sleep Number and Whirlpool 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 Whirlpool 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 Whirlpool, you can compare the effects of market volatilities on Sleep Number and Whirlpool 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 Whirlpool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sleep Number and Whirlpool.

Diversification Opportunities for Sleep Number and Whirlpool

0.67

Correlation Coefficient

Sleep Number  Whirlpool

Poor diversification

The 3 months correlation between Sleep and Whirlpool is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sleep Number Corp and Whirlpool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool 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 Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool has no effect on the direction of Sleep Number i.e., Sleep Number and Whirlpool go up and down completely randomly.

Pair Corralation between Sleep Number and Whirlpool

Given the investment horizon of 90 days Sleep Number Corp is expected to under-perform the Whirlpool. In addition to that, Sleep Number is 2.43 times more volatile than Whirlpool. It trades about -0.16 of its total potential returns per unit of risk. Whirlpool is currently generating about -0.09 per unit of volatility. If you would invest  11,405  in Whirlpool on December 26, 2024 and sell it today you would lose (2,022) from holding Whirlpool or give up 17.73% of portfolio value over 90 days.

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

Sleep Number Corp  vs.  Whirlpool

Sleep Number Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sleep Number Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Whirlpool

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whirlpool has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Sleep Number and Whirlpool

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

The idea behind Sleep Number Corp and Whirlpool 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 Stocks Directory module to find actively traded stocks across global markets.