Correlation Between KINDER and Sonos

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

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

Diversification Opportunities for KINDER and Sonos

-0.41

Correlation Coefficient

KINDER  Sonos

Very good diversification

The 3 months correlation between KINDER and Sonos is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and KINDER 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 KINDER MORGAN ENERGY 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 KINDER i.e., KINDER and Sonos go up and down completely randomly.

Pair Corralation between KINDER and Sonos

Assuming the 90 days trading horizon KINDER MORGAN ENERGY is expected to generate 0.58 times more return on investment than Sonos. However, KINDER MORGAN ENERGY is 1.72 times less risky than Sonos. It trades about 0.01 of its potential returns per unit of risk. Sonos Inc is currently generating about -0.14 per unit of risk. If you would invest  9,403  in KINDER MORGAN ENERGY on December 24, 2024 and sell it today you would earn a total of  31.00  from holding KINDER MORGAN ENERGY or generate 0.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.67%
Values	Daily Returns

KINDER MORGAN ENERGY  vs.  Sonos Inc

KINDER MORGAN ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER 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

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 conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with KINDER and Sonos

The main advantage of trading using opposite KINDER and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINDER 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 KINDER MORGAN ENERGY 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.