Correlation Between Mohawk Industries and Sleep Number
Can any of the company-specific risk be diversified away by investing in both Mohawk Industries 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 Mohawk Industries and Sleep Number into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mohawk Industries and Sleep Number Corp, you can compare the effects of market volatilities on Mohawk Industries 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 Mohawk Industries with a short position of Sleep Number. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mohawk Industries and Sleep Number.
Diversification Opportunities for Mohawk Industries and Sleep Number
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mohawk and Sleep is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mohawk Industries 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 Mohawk 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 Mohawk Industries 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 Mohawk Industries i.e., Mohawk Industries and Sleep Number go up and down completely randomly.
Pair Corralation between Mohawk Industries and Sleep Number
Assuming the 90 days horizon Mohawk Industries is expected to under-perform the Sleep Number. But the stock apears to be less risky and, when comparing its historical volatility, Mohawk Industries is 2.3 times less risky than Sleep Number. The stock trades about -0.03 of its potential returns per unit of risk. The Sleep Number Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,310 in Sleep Number Corp on September 12, 2024 and sell it today you would earn a total of 560.00 from holding Sleep Number Corp or generate 42.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mohawk Industries vs. Sleep Number Corp
Performance |
| Timeline |
| Mohawk Industries |
| Sleep Number Corp |
Mohawk Industries and Sleep Number Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mohawk Industries and Sleep Number
The main advantage of trading using opposite Mohawk Industries and Sleep Number positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mohawk Industries 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.| Mohawk Industries vs. LAir Liquide SA | Mohawk Industries vs. SEALED AIR | Mohawk Industries vs. Westinghouse Air Brake | Mohawk Industries vs. CVS Health |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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