Correlation Between Sonos and SM Investments
Can any of the company-specific risk be diversified away by investing in both Sonos and SM Investments 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 SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonos Inc and SM Investments, you can compare the effects of market volatilities on Sonos and SM Investments 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 SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and SM Investments.
Diversification Opportunities for Sonos and SM Investments
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sonos and SVTMF is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments 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 SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of Sonos i.e., Sonos and SM Investments go up and down completely randomly.
Pair Corralation between Sonos and SM Investments
Given the investment horizon of 90 days Sonos Inc is expected to generate 1.9 times more return on investment than SM Investments. However, Sonos is 1.9 times more volatile than SM Investments. It trades about 0.03 of its potential returns per unit of risk. SM Investments is currently generating about -0.13 per unit of risk. If you would invest 1,434 in Sonos Inc on September 12, 2024 and sell it today you would earn a total of 18.00 from holding Sonos Inc or generate 1.26% 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. SM Investments
Performance |
| Timeline |
| Sonos Inc |
| SM Investments |
Sonos and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonos and SM Investments
The main advantage of trading using opposite Sonos and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos position performs unexpectedly, SM Investments 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 SM Investments will offset losses from the drop in SM Investments' long position.The idea behind Sonos Inc and SM Investments 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.| SM Investments vs. Arrow Electronics | SM Investments vs. Jeld Wen Holding | SM Investments vs. Eldorado Gold Corp | SM Investments vs. Usio Inc |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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