Correlation Between Sonos and ECD Automotive

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Can any of the company-specific risk be diversified away by investing in both Sonos and ECD Automotive 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 ECD Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonos Inc and ECD Automotive Design, you can compare the effects of market volatilities on Sonos and ECD Automotive 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 ECD Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and ECD Automotive.

Diversification Opportunities for Sonos and ECD Automotive

SonosECDDiversified AwaySonosECDDiversified Away100%
0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Sonos and ECD is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and ECD Automotive Design in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECD Automotive Design 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 ECD Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECD Automotive Design has no effect on the direction of Sonos i.e., Sonos and ECD Automotive go up and down completely randomly.

Pair Corralation between Sonos and ECD Automotive

Given the investment horizon of 90 days Sonos Inc is expected to under-perform the ECD Automotive. But the stock apears to be less risky and, when comparing its historical volatility, Sonos Inc is 1.79 times less risky than ECD Automotive. The stock trades about -0.15 of its potential returns per unit of risk. The ECD Automotive Design is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  90.00  in ECD Automotive Design on November 27, 2024 and sell it today you would lose (6.40) from holding ECD Automotive Design or give up 7.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

Sonos Inc  vs.  ECD Automotive Design

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-5051015
JavaScript chart by amCharts 3.21.15SONO ECDA
       Timeline  
Sonos Inc 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1212.51313.51414.51515.5
ECD Automotive Design 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.80.850.90.9511.05

Sonos and ECD Automotive Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.05-3.03-2.02-1.0-0.01690.971.972.983.984.99 0.020.030.040.050.06
JavaScript chart by amCharts 3.21.15SONO ECDA
       Returns  

Pair Trading with Sonos and ECD Automotive

The main advantage of trading using opposite Sonos and ECD Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos position performs unexpectedly, ECD Automotive 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 ECD Automotive will offset losses from the drop in ECD Automotive's long position.
The idea behind Sonos Inc and ECD Automotive Design 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 Stocks Directory module to find actively traded stocks across global markets.

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