Correlation Between SoundHound and Holiday Island

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

By analyzing existing cross correlation between SoundHound AI and Holiday Island Holdings, you can compare the effects of market volatilities on SoundHound and Holiday Island 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 SoundHound with a short position of Holiday Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoundHound and Holiday Island.

Diversification Opportunities for SoundHound and Holiday Island

-0.5

Correlation Coefficient

SoundHound  Holiday Island

Very good diversification

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

Pair Corralation between SoundHound and Holiday Island

Given the investment horizon of 90 days SoundHound AI is expected to generate 0.52 times more return on investment than Holiday Island. However, SoundHound AI is 1.92 times less risky than Holiday Island. It trades about 0.15 of its potential returns per unit of risk. Holiday Island Holdings is currently generating about 0.07 per unit of risk. If you would invest  177.00  in SoundHound AI on October 7, 2024 and sell it today you would earn a total of  1,885  from holding SoundHound AI or generate 1064.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SoundHound AI  vs.  Holiday Island Holdings

SoundHound AI

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

Holiday Island Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holiday Island Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Holiday Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoundHound and Holiday Island

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

The idea behind SoundHound AI and Holiday Island Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.