Correlation Between Sonos and NETGEAR

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

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

Diversification Opportunities for Sonos and NETGEAR

0.68

Correlation Coefficient

Sonos  NETGEAR

Poor diversification

The 3 months correlation between Sonos and NETGEAR is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Sonos i.e., Sonos and NETGEAR go up and down completely randomly.

Pair Corralation between Sonos and NETGEAR

Given the investment horizon of 90 days Sonos Inc is expected to under-perform the NETGEAR. But the stock apears to be less risky and, when comparing its historical volatility, Sonos Inc is 1.04 times less risky than NETGEAR. The stock trades about -0.16 of its potential returns per unit of risk. The NETGEAR is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,814  in NETGEAR on December 27, 2024 and sell it today you would lose (352.00) from holding NETGEAR or give up 12.51% of portfolio value over 90 days.

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

Sonos Inc  vs.  NETGEAR

Sonos Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonos Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Sonos and NETGEAR

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

The idea behind Sonos Inc and NETGEAR 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.