Correlation Between Sonos and Plexus Corp

Can any of the company-specific risk be diversified away by investing in both Sonos and Plexus 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 Plexus 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 Plexus Corp, you can compare the effects of market volatilities on Sonos and Plexus 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 Plexus Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and Plexus Corp.

Diversification Opportunities for Sonos and Plexus Corp

0.88

Correlation Coefficient

Sonos  Plexus Corp

Very poor diversification

The 3 months correlation between Sonos and Plexus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of Sonos i.e., Sonos and Plexus Corp go up and down completely randomly.

Pair Corralation between Sonos and Plexus Corp

Given the investment horizon of 90 days Sonos Inc is expected to generate 2.4 times more return on investment than Plexus Corp. However, Sonos is 2.4 times more volatile than Plexus Corp. It trades about 0.29 of its potential returns per unit of risk. Plexus Corp is currently generating about 0.29 per unit of risk. If you would invest  1,263  in Sonos Inc on September 17, 2024 and sell it today you would earn a total of  194.00  from holding Sonos Inc or generate 15.36% return on investment over 90 days.

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

Sonos Inc  vs.  Plexus 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.

Plexus Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonos and Plexus Corp

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

The idea behind Sonos Inc and Plexus 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.