Correlation Between Sonos and Newell

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

By analyzing existing cross correlation between Sonos Inc and Newell Brands 5375, you can compare the effects of market volatilities on Sonos and Newell 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 Newell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and Newell.

Diversification Opportunities for Sonos and Newell

0.5

Correlation Coefficient

Sonos  Newell

Very weak diversification

The 3 months correlation between Sonos and Newell is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Newell Brands 5375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands 5375 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 Newell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands 5375 has no effect on the direction of Sonos i.e., Sonos and Newell go up and down completely randomly.

Pair Corralation between Sonos and Newell

Given the investment horizon of 90 days Sonos Inc is expected to under-perform the Newell. In addition to that, Sonos is 3.27 times more volatile than Newell Brands 5375. It trades about -0.07 of its total potential returns per unit of risk. Newell Brands 5375 is currently generating about -0.08 per unit of volatility. If you would invest  10,350  in Newell Brands 5375 on December 4, 2024 and sell it today you would lose (375.00) from holding Newell Brands 5375 or give up 3.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Sonos Inc  vs.  Newell Brands 5375

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.

Newell Brands 5375

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newell Brands 5375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Newell is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sonos and Newell

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

The idea behind Sonos Inc and Newell Brands 5375 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.