Correlation Between Sonos and TCL Electronics
Can any of the company-specific risk be diversified away by investing in both Sonos and TCL Electronics 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 TCL Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonos Inc and TCL Electronics Holdings, you can compare the effects of market volatilities on Sonos and TCL Electronics 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 TCL Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and TCL Electronics.
Diversification Opportunities for Sonos and TCL Electronics
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sonos and TCL is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and TCL Electronics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCL Electronics Holdings 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 TCL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCL Electronics Holdings has no effect on the direction of Sonos i.e., Sonos and TCL Electronics go up and down completely randomly.
Pair Corralation between Sonos and TCL Electronics
Given the investment horizon of 90 days Sonos Inc is expected to generate 0.61 times more return on investment than TCL Electronics. However, Sonos Inc is 1.63 times less risky than TCL Electronics. It trades about 0.13 of its potential returns per unit of risk. TCL Electronics Holdings is currently generating about -0.24 per unit of risk. If you would invest 1,306 in Sonos Inc on August 28, 2024 and sell it today you would earn a total of 94.00 from holding Sonos Inc or generate 7.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sonos Inc vs. TCL Electronics Holdings
Performance |
| Timeline |
| Sonos Inc |
| TCL Electronics Holdings |
Sonos and TCL Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonos and TCL Electronics
The main advantage of trading using opposite Sonos and TCL Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos position performs unexpectedly, TCL Electronics 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 TCL Electronics will offset losses from the drop in TCL Electronics' long position.| Sonos vs. LG Display Co | Sonos vs. Wearable Devices | Sonos vs. Universal Electronics | Sonos vs. Samsung Electronics Co |
| TCL Electronics vs. Apple Inc | TCL Electronics vs. Xiaomi Corp | TCL Electronics vs. Samsung Electronics Co | TCL Electronics vs. LG Display Co |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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