Correlation Between HONEYWELL and Sonos

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

By analyzing existing cross correlation between HONEYWELL INTL INC and Sonos Inc, you can compare the effects of market volatilities on HONEYWELL and Sonos 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 HONEYWELL with a short position of Sonos. Check out your portfolio center. Please also check ongoing floating volatility patterns of HONEYWELL and Sonos.

Diversification Opportunities for HONEYWELL and Sonos

-0.12

Correlation Coefficient

HONEYWELL  Sonos

Good diversification

The 3 months correlation between HONEYWELL and Sonos is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTL INC and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and HONEYWELL 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 HONEYWELL INTL INC are associated (or correlated) with Sonos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonos Inc has no effect on the direction of HONEYWELL i.e., HONEYWELL and Sonos go up and down completely randomly.

Pair Corralation between HONEYWELL and Sonos

Assuming the 90 days trading horizon HONEYWELL is expected to generate 1.38 times less return on investment than Sonos. But when comparing it to its historical volatility, HONEYWELL INTL INC is 1.35 times less risky than Sonos. It trades about 0.1 of its potential returns per unit of risk. Sonos Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Sonos Inc on September 25, 2024 and sell it today you would earn a total of  72.50  from holding Sonos Inc or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	61.9%
Values	Daily Returns

HONEYWELL INTL INC  vs.  Sonos Inc

HONEYWELL INTL INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sonos Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Sonos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HONEYWELL and Sonos

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

The idea behind HONEYWELL INTL INC and Sonos Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.