Correlation Between Sonos and Steven Madden

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

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

Diversification Opportunities for Sonos and Steven Madden

-0.72

Correlation Coefficient

Sonos  Steven Madden

Pay attention - limited upside

The 3 months correlation between Sonos and Steven is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Sonos i.e., Sonos and Steven Madden go up and down completely randomly.

Pair Corralation between Sonos and Steven Madden

Given the investment horizon of 90 days Sonos is expected to generate 16.76 times less return on investment than Steven Madden. In addition to that, Sonos is 1.61 times more volatile than Steven Madden. It trades about 0.0 of its total potential returns per unit of risk. Steven Madden is currently generating about 0.04 per unit of volatility. If you would invest  3,214  in Steven Madden on October 8, 2024 and sell it today you would earn a total of  977.00  from holding Steven Madden or generate 30.4% return on investment over 90 days.

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

Sonos Inc  vs.  Steven Madden

Sonos Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 13 (%) 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.

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Pair Trading with Sonos and Steven Madden

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

The idea behind Sonos Inc and Steven Madden 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.