Correlation Between Sonos and Virgin

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

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

Diversification Opportunities for Sonos and Virgin

-0.15

Correlation Coefficient

Sonos  Virgin

Good diversification

The 3 months correlation between Sonos and Virgin is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Virgin Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Media Communi 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 Virgin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Media Communi has no effect on the direction of Sonos i.e., Sonos and Virgin go up and down completely randomly.

Pair Corralation between Sonos and Virgin

Given the investment horizon of 90 days Sonos Inc is expected to under-perform the Virgin. In addition to that, Sonos is 4.74 times more volatile than Virgin Media Communications. It trades about -0.07 of its total potential returns per unit of risk. Virgin Media Communications is currently generating about 0.05 per unit of volatility. If you would invest  8,575  in Virgin Media Communications on December 4, 2024 and sell it today you would earn a total of  112.00  from holding Virgin Media Communications or generate 1.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

Sonos Inc  vs.  Virgin Media Communications

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.

Virgin Media Communi

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Media Communications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Virgin 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 Virgin

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

The idea behind Sonos Inc and Virgin Media Communications 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.