Correlation Between Samsung Electronics and Sonos

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

By analyzing existing cross correlation between Samsung Electronics Co and Sonos Inc, you can compare the effects of market volatilities on Samsung Electronics and Sonos 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 Samsung Electronics with a short position of Sonos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Sonos.

Diversification Opportunities for Samsung Electronics and Sonos

0.53

Correlation Coefficient

Samsung Electronics  Sonos

Very weak diversification

The 3 months correlation between Samsung and Sonos is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc and Samsung Electronics 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 Samsung Electronics Co are associated (or correlated) with Sonos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonos Inc has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Sonos go up and down completely randomly.

Pair Corralation between Samsung Electronics and Sonos

Assuming the 90 days horizon Samsung Electronics is expected to generate 24.35 times less return on investment than Sonos. But when comparing it to its historical volatility, Samsung Electronics Co is 29.94 times less risky than Sonos. It trades about 0.13 of its potential returns per unit of risk. Sonos Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,180  in Sonos Inc on September 1, 2024 and sell it today you would earn a total of  181.00  from holding Sonos Inc or generate 15.34% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Sonos Inc

Samsung Electronics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Samsung Electronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Samsung Electronics and Sonos

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

The idea behind Samsung Electronics Co and Sonos Inc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.