Correlation Between Sonos and 629377CU4

Can any of the company-specific risk be diversified away by investing in both Sonos and 629377CU4 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 629377CU4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sonos Inc and NRG 1025, you can compare the effects of market volatilities on Sonos and 629377CU4 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 629377CU4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and 629377CU4.

Diversification Opportunities for Sonos and 629377CU4

0.32

Correlation Coefficient

Sonos  629377CU4

Weak diversification

The 3 months correlation between Sonos and 629377CU4 is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and NRG 1025 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 629377CU4 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 629377CU4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 629377CU4 has no effect on the direction of Sonos i.e., Sonos and 629377CU4 go up and down completely randomly.

Pair Corralation between Sonos and 629377CU4

Given the investment horizon of 90 days Sonos Inc is expected to under-perform the 629377CU4. But the stock apears to be less risky and, when comparing its historical volatility, Sonos Inc is 1.39 times less risky than 629377CU4. The stock trades about -0.13 of its potential returns per unit of risk. The NRG 1025 is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  11,085  in NRG 1025 on December 23, 2024 and sell it today you would lose (422.00) from holding NRG 1025 or give up 3.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.41%
Values	Daily Returns

Sonos Inc  vs.  NRG 1025

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 conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

629377CU4

Risk-Adjusted Performance

Very Weak

Over the last 90 days NRG 1025 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 629377CU4 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sonos and 629377CU4

The main advantage of trading using opposite Sonos and 629377CU4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos position performs unexpectedly, 629377CU4 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 629377CU4 will offset losses from the drop in 629377CU4's long position.

The idea behind Sonos Inc and NRG 1025 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.