Correlation Between Wyndham and Sonos

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

By analyzing existing cross correlation between Wyndham Destinations 4625 and Sonos Inc, you can compare the effects of market volatilities on Wyndham 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 Wyndham with a short position of Sonos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham and Sonos.

Diversification Opportunities for Wyndham and Sonos

-0.2

Correlation Coefficient

Wyndham  Sonos

Good diversification

The 3 months correlation between Wyndham and Sonos is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Destinations 4625 and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and Wyndham 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 Wyndham Destinations 4625 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 Wyndham i.e., Wyndham and Sonos go up and down completely randomly.

Pair Corralation between Wyndham and Sonos

Assuming the 90 days trading horizon Wyndham Destinations 4625 is expected to under-perform the Sonos. But the bond apears to be less risky and, when comparing its historical volatility, Wyndham Destinations 4625 is 4.05 times less risky than Sonos. The bond trades about -0.33 of its potential returns per unit of risk. The Sonos Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,488  in Sonos Inc on October 8, 2024 and sell it today you would earn a total of  11.00  from holding Sonos Inc or generate 0.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.42%
Values	Daily Returns

Wyndham Destinations 4625  vs.  Sonos Inc

Wyndham Destinations 4625

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wyndham Destinations 4625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Wyndham Destinations 4625 investors.

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.

Pair Trading with Wyndham and Sonos

The main advantage of trading using opposite Wyndham and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wyndham 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 Wyndham Destinations 4625 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.