Correlation Between Sonos and Herc Holdings

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

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

Diversification Opportunities for Sonos and Herc Holdings

0.62

Correlation Coefficient

Sonos  Herc Holdings

Poor diversification

The 3 months correlation between Sonos and Herc is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc 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 Herc Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herc Holdings has no effect on the direction of Sonos i.e., Sonos and Herc Holdings go up and down completely randomly.

Pair Corralation between Sonos and Herc Holdings

Given the investment horizon of 90 days Sonos Inc is expected to generate 0.73 times more return on investment than Herc Holdings. However, Sonos Inc is 1.37 times less risky than Herc Holdings. It trades about 0.17 of its potential returns per unit of risk. Herc Holdings is currently generating about 0.1 per unit of risk. If you would invest  1,181  in Sonos Inc on October 1, 2024 and sell it today you would earn a total of  321.00  from holding Sonos Inc or generate 27.18% 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.  Herc Holdings

Sonos Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 13 (%) 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.

Herc Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonos and Herc Holdings

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

The idea behind Sonos Inc and Herc Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.