Correlation Between Sonos and Knife River
Can any of the company-specific risk be diversified away by investing in both Sonos and Knife River 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 Knife River into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonos Inc and Knife River, you can compare the effects of market volatilities on Sonos and Knife River 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 Knife River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and Knife River.
Diversification Opportunities for Sonos and Knife River
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sonos and Knife is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River 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 Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of Sonos i.e., Sonos and Knife River go up and down completely randomly.
Pair Corralation between Sonos and Knife River
Given the investment horizon of 90 days Sonos Inc is expected to under-perform the Knife River. But the stock apears to be less risky and, when comparing its historical volatility, Sonos Inc is 1.7 times less risky than Knife River. The stock trades about -0.18 of its potential returns per unit of risk. The Knife River is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 10,356 in Knife River on October 25, 2024 and sell it today you would earn a total of 343.00 from holding Knife River or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sonos Inc vs. Knife River
Performance |
| Timeline |
| Sonos Inc |
| Knife River |
Sonos and Knife River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonos and Knife River
The main advantage of trading using opposite Sonos and Knife River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos position performs unexpectedly, Knife River 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 Knife River will offset losses from the drop in Knife River's long position.The idea behind Sonos Inc and Knife River 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.| Knife River vs. Hooker Furniture | Knife River vs. Norfolk Southern | Knife River vs. Coty Inc | Knife River vs. Academy Sports Outdoors |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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