Correlation Between Sonos and BrightSpring Health

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

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

Diversification Opportunities for Sonos and BrightSpring Health

0.6

Correlation Coefficient

Sonos  BrightSpring Health

Poor diversification

The 3 months correlation between Sonos and BrightSpring is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and BrightSpring Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightSpring Health and Sonos 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 Sonos Inc are associated (or correlated) with BrightSpring Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightSpring Health has no effect on the direction of Sonos i.e., Sonos and BrightSpring Health go up and down completely randomly.

Pair Corralation between Sonos and BrightSpring Health

Given the investment horizon of 90 days Sonos Inc is expected to under-perform the BrightSpring Health. In addition to that, Sonos is 1.32 times more volatile than BrightSpring Health Services,. It trades about 0.0 of its total potential returns per unit of risk. BrightSpring Health Services, is currently generating about 0.09 per unit of volatility. If you would invest  4,351  in BrightSpring Health Services, on October 10, 2024 and sell it today you would earn a total of  2,021  from holding BrightSpring Health Services, or generate 46.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	48.39%
Values	Daily Returns

Sonos Inc  vs.  BrightSpring Health Services,

Sonos Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 12 (%) 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.

BrightSpring Health

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BrightSpring Health Services, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, BrightSpring Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonos and BrightSpring Health

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

The idea behind Sonos Inc and BrightSpring Health Services, 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.