Correlation Between Sonos and 532716AN7

Can any of the company-specific risk be diversified away by investing in both Sonos and 532716AN7 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 532716AN7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sonos Inc and L Brands 76, you can compare the effects of market volatilities on Sonos and 532716AN7 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 532716AN7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and 532716AN7.

Diversification Opportunities for Sonos and 532716AN7

0.22

Correlation Coefficient

Sonos  532716AN7

Modest diversification

The 3 months correlation between Sonos and 532716AN7 is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and L Brands 76 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Brands 76 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 532716AN7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Brands 76 has no effect on the direction of Sonos i.e., Sonos and 532716AN7 go up and down completely randomly.

Pair Corralation between Sonos and 532716AN7

Given the investment horizon of 90 days Sonos Inc is expected to generate 1.28 times more return on investment than 532716AN7. However, Sonos is 1.28 times more volatile than L Brands 76. It trades about 0.02 of its potential returns per unit of risk. L Brands 76 is currently generating about -0.05 per unit of risk. If you would invest  1,379  in Sonos Inc on October 25, 2024 and sell it today you would earn a total of  31.50  from holding Sonos Inc or generate 2.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.99%
Values	Daily Returns

Sonos Inc  vs.  L Brands 76

Sonos Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sonos may actually be approaching a critical reversion point that can send shares even higher in February 2025.

L Brands 76

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L Brands 76 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for L Brands 76 investors.

Pair Trading with Sonos and 532716AN7

The main advantage of trading using opposite Sonos and 532716AN7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos position performs unexpectedly, 532716AN7 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 532716AN7 will offset losses from the drop in 532716AN7's long position.

The idea behind Sonos Inc and L Brands 76 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.