Correlation Between Sonos and Sealed Air

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

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

Diversification Opportunities for Sonos and Sealed Air

0.59

Correlation Coefficient

Sonos  Sealed Air

Very weak diversification

The 3 months correlation between Sonos and Sealed is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and Sealed Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air 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 Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air has no effect on the direction of Sonos i.e., Sonos and Sealed Air go up and down completely randomly.

Pair Corralation between Sonos and Sealed Air

Given the investment horizon of 90 days Sonos Inc is expected to generate 1.58 times more return on investment than Sealed Air. However, Sonos is 1.58 times more volatile than Sealed Air. It trades about 0.13 of its potential returns per unit of risk. Sealed Air is currently generating about 0.04 per unit of risk. If you would invest  1,219  in Sonos Inc on September 18, 2024 and sell it today you would earn a total of  238.00  from holding Sonos Inc or generate 19.52% return on investment over 90 days.

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

Sonos Inc  vs.  Sealed Air

Sonos Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 9 (%) 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.

Sealed Air

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sonos and Sealed Air

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

The idea behind Sonos Inc and Sealed Air 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..