Correlation Between Zepp Health and Sonos

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

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

Diversification Opportunities for Zepp Health and Sonos

-0.48

Correlation Coefficient

Zepp Health  Sonos

Very good diversification

The 3 months correlation between Zepp and Sonos is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Zepp Health Corp and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and Zepp Health 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 Zepp Health Corp 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 Zepp Health i.e., Zepp Health and Sonos go up and down completely randomly.

Pair Corralation between Zepp Health and Sonos

Given the investment horizon of 90 days Zepp Health Corp is expected to generate 1.44 times more return on investment than Sonos. However, Zepp Health is 1.44 times more volatile than Sonos Inc. It trades about 0.05 of its potential returns per unit of risk. Sonos Inc is currently generating about -0.16 per unit of risk. If you would invest  278.00  in Zepp Health Corp on December 27, 2024 and sell it today you would earn a total of  22.00  from holding Zepp Health Corp or generate 7.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Zepp Health Corp  vs.  Sonos Inc

Zepp Health Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zepp Health Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Zepp Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Zepp Health and Sonos

The main advantage of trading using opposite Zepp Health and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zepp Health 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 Zepp Health Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.