Correlation Between CF Industries and Sonos
Can any of the company-specific risk be diversified away by investing in both CF Industries 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 CF Industries and Sonos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CF Industries Holdings and Sonos Inc, you can compare the effects of market volatilities on CF Industries 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 CF Industries with a short position of Sonos. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Sonos.
Diversification Opportunities for CF Industries and Sonos
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CF Industries and Sonos is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and CF Industries 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 CF Industries Holdings 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 CF Industries i.e., CF Industries and Sonos go up and down completely randomly.
Pair Corralation between CF Industries and Sonos
Allowing for the 90-day total investment horizon CF Industries is expected to generate 1.04 times less return on investment than Sonos. But when comparing it to its historical volatility, CF Industries Holdings is 1.71 times less risky than Sonos. It trades about 0.13 of its potential returns per unit of risk. Sonos Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,259 in Sonos Inc on August 26, 2024 and sell it today you would earn a total of 90.00 from holding Sonos Inc or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Industries Holdings vs. Sonos Inc
Performance |
| Timeline |
| CF Industries Holdings |
| Sonos Inc |
CF Industries and Sonos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Sonos
The main advantage of trading using opposite CF Industries and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries 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 CF Industries Holdings 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.| Sonos vs. VOXX International | Sonos vs. LG Display Co | Sonos vs. Vizio Holding Corp | Sonos vs. Wearable Devices |
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 Stocks Directory module to find actively traded stocks across global markets.
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