Correlation Between Sonos and Radcom

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

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

Diversification Opportunities for Sonos and Radcom

-0.26

Correlation Coefficient

Sonos  Radcom

Very good diversification

The 3 months correlation between Sonos and Radcom is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Sonos i.e., Sonos and Radcom go up and down completely randomly.

Pair Corralation between Sonos and Radcom

Given the investment horizon of 90 days Sonos Inc is expected to under-perform the Radcom. But the stock apears to be less risky and, when comparing its historical volatility, Sonos Inc is 1.03 times less risky than Radcom. The stock trades about -0.02 of its potential returns per unit of risk. The Radcom is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  985.00  in Radcom on December 4, 2024 and sell it today you would earn a total of  134.50  from holding Radcom or generate 13.65% return on investment over 90 days.

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

Sonos Inc  vs.  Radcom

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 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.

Radcom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Radcom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Radcom is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sonos and Radcom

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

The idea behind Sonos Inc and Radcom 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.