Correlation Between Sonos and Naked Wines

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

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

Diversification Opportunities for Sonos and Naked Wines

0.32

Correlation Coefficient

Sonos  Naked Wines

Weak diversification

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

Pair Corralation between Sonos and Naked Wines

Given the investment horizon of 90 days Sonos Inc is expected to generate 1.33 times more return on investment than Naked Wines. However, Sonos is 1.33 times more volatile than Naked Wines plc. It trades about 0.01 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.23 per unit of risk. If you would invest  1,488  in Sonos Inc on October 9, 2024 and sell it today you would earn a total of  1.00  from holding Sonos Inc or generate 0.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Sonos Inc  vs.  Naked Wines plc

Sonos Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 14 (%) 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.

Naked Wines plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Naked Wines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sonos and Naked Wines

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

The idea behind Sonos Inc and Naked Wines plc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.