Correlation Between Coupang LLC and Sonos

Can any of the company-specific risk be diversified away by investing in both Coupang LLC and Sonos 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 Coupang LLC and Sonos into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Coupang LLC and Sonos Inc, you can compare the effects of market volatilities on Coupang LLC and Sonos 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 Coupang LLC with a short position of Sonos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coupang LLC and Sonos.

Diversification Opportunities for Coupang LLC and Sonos

-0.54

Correlation Coefficient

Coupang LLC  Sonos

Excellent diversification

The 3 months correlation between Coupang and Sonos is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Coupang LLC and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and Coupang LLC 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 Coupang LLC are associated (or correlated) with Sonos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonos Inc has no effect on the direction of Coupang LLC i.e., Coupang LLC and Sonos go up and down completely randomly.

Pair Corralation between Coupang LLC and Sonos

Given the investment horizon of 90 days Coupang LLC is expected to under-perform the Sonos. But the stock apears to be less risky and, when comparing its historical volatility, Coupang LLC is 1.61 times less risky than Sonos. The stock trades about -0.27 of its potential returns per unit of risk. The Sonos Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Sonos Inc on September 24, 2024 and sell it today you would earn a total of  58.00  from holding Sonos Inc or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Coupang LLC  vs.  Sonos Inc

Coupang LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coupang LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sonos Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Sonos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coupang LLC and Sonos

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

The idea behind Coupang LLC and Sonos Inc 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.