Correlation Between Sonos and Panasonic Corp

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

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

Diversification Opportunities for Sonos and Panasonic Corp

0.69

Correlation Coefficient

Sonos  Panasonic Corp

Poor diversification

The 3 months correlation between Sonos and Panasonic is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Panasonic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panasonic Corp 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 Panasonic Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panasonic Corp has no effect on the direction of Sonos i.e., Sonos and Panasonic Corp go up and down completely randomly.

Pair Corralation between Sonos and Panasonic Corp

Given the investment horizon of 90 days Sonos is expected to generate 1.05 times less return on investment than Panasonic Corp. But when comparing it to its historical volatility, Sonos Inc is 1.11 times less risky than Panasonic Corp. It trades about 0.11 of its potential returns per unit of risk. Panasonic Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  861.00  in Panasonic Corp on September 19, 2024 and sell it today you would earn a total of  143.00  from holding Panasonic Corp or generate 16.61% 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.  Panasonic Corp

Sonos Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 8 (%) 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.

Panasonic Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Panasonic Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Panasonic Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonos and Panasonic Corp

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

The idea behind Sonos Inc and Panasonic Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.