Correlation Between Universal Display and Sonos

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

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

Diversification Opportunities for Universal Display and Sonos

-0.86

Correlation Coefficient

Universal Display  Sonos

Pay attention - limited upside

The 3 months correlation between Universal and Sonos is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and Universal Display 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 Universal Display 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 Universal Display i.e., Universal Display and Sonos go up and down completely randomly.

Pair Corralation between Universal Display and Sonos

Given the investment horizon of 90 days Universal Display is expected to under-perform the Sonos. But the stock apears to be less risky and, when comparing its historical volatility, Universal Display is 1.06 times less risky than Sonos. The stock trades about -0.22 of its potential returns per unit of risk. The Sonos Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,229  in Sonos Inc on September 30, 2024 and sell it today you would earn a total of  273.00  from holding Sonos Inc or generate 22.21% return on investment over 90 days.

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

Universal Display  vs.  Sonos Inc

Universal Display

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Display has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Sonos Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sonos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Display and Sonos

The main advantage of trading using opposite Universal Display and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display 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 Universal Display 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.