Correlation Between Sonos and Occidental

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

By analyzing existing cross correlation between Sonos Inc and Occidental Petroleum 44, you can compare the effects of market volatilities on Sonos and Occidental 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 Occidental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and Occidental.

Diversification Opportunities for Sonos and Occidental

-0.51

Correlation Coefficient

Sonos  Occidental

Excellent diversification

The 3 months correlation between Sonos and Occidental is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Occidental Petroleum 44 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Sonos i.e., Sonos and Occidental go up and down completely randomly.

Pair Corralation between Sonos and Occidental

Given the investment horizon of 90 days Sonos Inc is expected to generate 0.98 times more return on investment than Occidental. However, Sonos Inc is 1.02 times less risky than Occidental. It trades about 0.18 of its potential returns per unit of risk. Occidental Petroleum 44 is currently generating about 0.05 per unit of risk. If you would invest  1,172  in Sonos Inc on October 9, 2024 and sell it today you would earn a total of  327.00  from holding Sonos Inc or generate 27.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	72.13%
Values	Daily Returns

Sonos Inc  vs.  Occidental Petroleum 44

Sonos Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 14 (%) 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.

Occidental Petroleum

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum 44 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Occidental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sonos and Occidental

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

The idea behind Sonos Inc and Occidental Petroleum 44 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..