Correlation Between Sonos and Capital Southwest
Can any of the company-specific risk be diversified away by investing in both Sonos and Capital Southwest 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 Sonos and Capital Southwest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonos Inc and Capital Southwest, you can compare the effects of market volatilities on Sonos and Capital Southwest 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 Sonos with a short position of Capital Southwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and Capital Southwest.
Diversification Opportunities for Sonos and Capital Southwest
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sonos and Capital is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Capital Southwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Southwest and Sonos 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 Sonos Inc are associated (or correlated) with Capital Southwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Southwest has no effect on the direction of Sonos i.e., Sonos and Capital Southwest go up and down completely randomly.
Pair Corralation between Sonos and Capital Southwest
Given the investment horizon of 90 days Sonos Inc is expected to generate 6.95 times more return on investment than Capital Southwest. However, Sonos is 6.95 times more volatile than Capital Southwest. It trades about 0.07 of its potential returns per unit of risk. Capital Southwest is currently generating about 0.06 per unit of risk. If you would invest 1,306 in Sonos Inc on August 27, 2024 and sell it today you would earn a total of 43.00 from holding Sonos Inc or generate 3.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sonos Inc vs. Capital Southwest
Performance |
| Timeline |
| Sonos Inc |
| Capital Southwest |
Sonos and Capital Southwest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonos and Capital Southwest
The main advantage of trading using opposite Sonos and Capital Southwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos position performs unexpectedly, Capital Southwest 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 Capital Southwest will offset losses from the drop in Capital Southwest's long position.| Sonos vs. VOXX International | Sonos vs. LG Display Co | Sonos vs. Wearable Devices | Sonos vs. Universal Electronics |
| Capital Southwest vs. Marine Products | Capital Southwest vs. Helmerich and Payne | Capital Southwest vs. Sonos Inc | Capital Southwest vs. National Beverage Corp |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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