Correlation Between Sonos and Sphere Entertainment

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Can any of the company-specific risk be diversified away by investing in both Sonos and Sphere Entertainment 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 Sphere Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonos Inc and Sphere Entertainment Co, you can compare the effects of market volatilities on Sonos and Sphere Entertainment 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 Sphere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and Sphere Entertainment.

Diversification Opportunities for Sonos and Sphere Entertainment

SonosSphereDiversified AwaySonosSphereDiversified Away100%
-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Sonos and Sphere is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Sonos i.e., Sonos and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Sonos and Sphere Entertainment

Given the investment horizon of 90 days Sonos Inc is expected to under-perform the Sphere Entertainment. In addition to that, Sonos is 1.03 times more volatile than Sphere Entertainment Co. It trades about -0.06 of its total potential returns per unit of risk. Sphere Entertainment Co is currently generating about 0.11 per unit of volatility. If you would invest  4,104  in Sphere Entertainment Co on November 26, 2024 and sell it today you would earn a total of  588.00  from holding Sphere Entertainment Co or generate 14.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sonos Inc  vs.  Sphere Entertainment Co

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -5051015
JavaScript chart by amCharts 3.21.15SONO SPHR
       Timeline  
Sonos Inc 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Sonos Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1212.51313.51414.51515.5
Sphere Entertainment 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Sphere Entertainment Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Sphere Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3638404244464850

Sonos and Sphere Entertainment Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.17-3.12-2.07-1.03-0.01620.931.92.873.854.82 0.050.060.070.08
JavaScript chart by amCharts 3.21.15SONO SPHR
       Returns  

Pair Trading with Sonos and Sphere Entertainment

The main advantage of trading using opposite Sonos and Sphere Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos position performs unexpectedly, Sphere Entertainment 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 Sphere Entertainment will offset losses from the drop in Sphere Entertainment's long position.
The idea behind Sonos Inc and Sphere Entertainment Co 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.
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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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