Correlation Between Sonos and National Storage

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

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

Diversification Opportunities for Sonos and National Storage

-0.24

Correlation Coefficient

Sonos  National Storage

Very good diversification

The 3 months correlation between Sonos and National is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and National Storage REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage REIT 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage REIT has no effect on the direction of Sonos i.e., Sonos and National Storage go up and down completely randomly.

Pair Corralation between Sonos and National Storage

Given the investment horizon of 90 days Sonos Inc is expected to generate 0.53 times more return on investment than National Storage. However, Sonos Inc is 1.89 times less risky than National Storage. It trades about 0.06 of its potential returns per unit of risk. National Storage REIT is currently generating about -0.23 per unit of risk. If you would invest  1,452  in Sonos Inc on October 11, 2024 and sell it today you would earn a total of  23.00  from holding Sonos Inc or generate 1.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Sonos Inc  vs.  National Storage REIT

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.

National Storage REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storage REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, National Storage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sonos and National Storage

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

The idea behind Sonos Inc and National Storage REIT 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.