Correlation Between Sonos and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Sonos and Sensient Technologies 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 Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonos Inc and Sensient Technologies, you can compare the effects of market volatilities on Sonos and Sensient Technologies 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 Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and Sensient Technologies.
Diversification Opportunities for Sonos and Sensient Technologies
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sonos and Sensient is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies 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 Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of Sonos i.e., Sonos and Sensient Technologies go up and down completely randomly.
Pair Corralation between Sonos and Sensient Technologies
Given the investment horizon of 90 days Sonos Inc is expected to generate 1.62 times more return on investment than Sensient Technologies. However, Sonos is 1.62 times more volatile than Sensient Technologies. It trades about 0.09 of its potential returns per unit of risk. Sensient Technologies is currently generating about -0.02 per unit of risk. If you would invest 1,298 in Sonos Inc on August 30, 2024 and sell it today you would earn a total of 66.00 from holding Sonos Inc or generate 5.08% 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. Sensient Technologies
Performance |
| Timeline |
| Sonos Inc |
| Sensient Technologies |
Sonos and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonos and Sensient Technologies
The main advantage of trading using opposite Sonos and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos position performs unexpectedly, Sensient Technologies 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 Sensient Technologies will offset losses from the drop in Sensient Technologies' long position.The idea behind Sonos Inc and Sensient Technologies 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.| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Transaction History View history of all your transactions and understand their impact on performance |