Correlation Between Sonos and TARGET

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

By analyzing existing cross correlation between Sonos Inc and TARGET P 7, you can compare the effects of market volatilities on Sonos and TARGET 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 TARGET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and TARGET.

Diversification Opportunities for Sonos and TARGET

0.13

Correlation Coefficient

Sonos  TARGET

Average diversification

The 3 months correlation between Sonos and TARGET is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and TARGET P 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TARGET P 7 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 TARGET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TARGET P 7 has no effect on the direction of Sonos i.e., Sonos and TARGET go up and down completely randomly.

Pair Corralation between Sonos and TARGET

Given the investment horizon of 90 days Sonos is expected to generate 32.22 times less return on investment than TARGET. But when comparing it to its historical volatility, Sonos Inc is 3.7 times less risky than TARGET. It trades about 0.01 of its potential returns per unit of risk. TARGET P 7 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,151  in TARGET P 7 on October 10, 2024 and sell it today you would earn a total of  284.00  from holding TARGET P 7 or generate 2.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	35.0%
Values	Daily Returns

Sonos Inc  vs.  TARGET P 7

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.

TARGET P 7

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TARGET P 7 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TARGET 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 TARGET

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

The idea behind Sonos Inc and TARGET P 7 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 Stocks Directory module to find actively traded stocks across global markets.