Correlation Between Whirlpool and Sleep Number

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

By analyzing existing cross correlation between Whirlpool and Sleep Number Corp, you can compare the effects of market volatilities on Whirlpool and Sleep Number 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 Whirlpool with a short position of Sleep Number. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whirlpool and Sleep Number.

Diversification Opportunities for Whirlpool and Sleep Number

0.67

Correlation Coefficient

Whirlpool  Sleep Number

Poor diversification

The 3 months correlation between Whirlpool and Sleep is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Whirlpool and Sleep Number Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Number Corp and Whirlpool 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 Whirlpool are associated (or correlated) with Sleep Number. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Number Corp has no effect on the direction of Whirlpool i.e., Whirlpool and Sleep Number go up and down completely randomly.

Pair Corralation between Whirlpool and Sleep Number

Considering the 90-day investment horizon Whirlpool is expected to generate 0.41 times more return on investment than Sleep Number. However, Whirlpool is 2.43 times less risky than Sleep Number. It trades about -0.09 of its potential returns per unit of risk. Sleep Number Corp is currently generating about -0.16 per unit of risk. If you would invest  11,405  in Whirlpool on December 26, 2024 and sell it today you would lose (2,022) from holding Whirlpool or give up 17.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Whirlpool  vs.  Sleep Number Corp

Whirlpool

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whirlpool has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Sleep Number Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sleep Number Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Whirlpool and Sleep Number

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

The idea behind Whirlpool and Sleep Number Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.