Correlation Between YHN Acquisition and Sonos

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

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

Diversification Opportunities for YHN Acquisition and Sonos

-0.21

Correlation Coefficient

YHN Acquisition  Sonos

Very good diversification

The 3 months correlation between YHN and Sonos is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding YHN Acquisition I and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and YHN Acquisition 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 YHN Acquisition I 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 YHN Acquisition i.e., YHN Acquisition and Sonos go up and down completely randomly.

Pair Corralation between YHN Acquisition and Sonos

Assuming the 90 days horizon YHN Acquisition I is expected to generate 7.08 times more return on investment than Sonos. However, YHN Acquisition is 7.08 times more volatile than Sonos Inc. It trades about 0.12 of its potential returns per unit of risk. Sonos Inc is currently generating about -0.05 per unit of risk. If you would invest  11.00  in YHN Acquisition I on December 5, 2024 and sell it today you would earn a total of  3.00  from holding YHN Acquisition I or generate 27.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.63%
Values	Daily Returns

YHN Acquisition I  vs.  Sonos Inc

YHN Acquisition I

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YHN Acquisition I are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, YHN Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with YHN Acquisition and Sonos

The main advantage of trading using opposite YHN Acquisition and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YHN Acquisition 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 YHN Acquisition I 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.