Correlation Between SoundHound and Wise Plc

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

By analyzing existing cross correlation between SoundHound AI and Wise plc, you can compare the effects of market volatilities on SoundHound and Wise Plc 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 SoundHound with a short position of Wise Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoundHound and Wise Plc.

Diversification Opportunities for SoundHound and Wise Plc

0.85

Correlation Coefficient

SoundHound  Wise Plc

Very poor diversification

The 3 months correlation between SoundHound and Wise is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and Wise plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wise plc and SoundHound 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 SoundHound AI are associated (or correlated) with Wise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wise plc has no effect on the direction of SoundHound i.e., SoundHound and Wise Plc go up and down completely randomly.

Pair Corralation between SoundHound and Wise Plc

Given the investment horizon of 90 days SoundHound AI is expected to generate 4.35 times more return on investment than Wise Plc. However, SoundHound is 4.35 times more volatile than Wise plc. It trades about 0.59 of its potential returns per unit of risk. Wise plc is currently generating about 0.36 per unit of risk. If you would invest  644.00  in SoundHound AI on September 21, 2024 and sell it today you would earn a total of  1,532  from holding SoundHound AI or generate 237.81% return on investment over 90 days.

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

SoundHound AI  vs.  Wise plc

SoundHound AI

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

Wise plc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wise plc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Wise Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoundHound and Wise Plc

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

The idea behind SoundHound AI and Wise plc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.