Correlation Between Sonos and Life Time

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

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

Diversification Opportunities for Sonos and Life Time

-0.43

Correlation Coefficient

Sonos  Life Time

Very good diversification

The 3 months correlation between Sonos and Life is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Life Time Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Time Group 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 Life Time. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Time Group has no effect on the direction of Sonos i.e., Sonos and Life Time go up and down completely randomly.

Pair Corralation between Sonos and Life Time

Given the investment horizon of 90 days Sonos Inc is expected to generate 1.41 times more return on investment than Life Time. However, Sonos is 1.41 times more volatile than Life Time Group. It trades about 0.17 of its potential returns per unit of risk. Life Time Group is currently generating about -0.22 per unit of risk. If you would invest  1,290  in Sonos Inc on September 20, 2024 and sell it today you would earn a total of  121.00  from holding Sonos Inc or generate 9.38% return on investment over 90 days.

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

Sonos Inc  vs.  Life Time Group

Sonos Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 7 (%) 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.

Life Time Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Time Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Sonos and Life Time

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

The idea behind Sonos Inc and Life Time Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.