Correlation Between Sonos and KINDER

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

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

Diversification Opportunities for Sonos and KINDER

-0.62

Correlation Coefficient

Sonos  KINDER

Excellent diversification

The 3 months correlation between Sonos and KINDER is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN ENERGY 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of Sonos i.e., Sonos and KINDER go up and down completely randomly.

Pair Corralation between Sonos and KINDER

Given the investment horizon of 90 days Sonos Inc is expected to generate 2.9 times more return on investment than KINDER. However, Sonos is 2.9 times more volatile than KINDER MORGAN ENERGY. It trades about 0.03 of its potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about -0.07 per unit of risk. If you would invest  1,434  in Sonos Inc on September 12, 2024 and sell it today you would earn a total of  18.00  from holding Sonos Inc or generate 1.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	76.19%
Values	Daily Returns

Sonos Inc  vs.  KINDER MORGAN ENERGY

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.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KINDER MORGAN ENERGY investors.

Pair Trading with Sonos and KINDER

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

The idea behind Sonos Inc and KINDER MORGAN ENERGY 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 Global Correlations module to find global opportunities by holding instruments from different markets.