Correlation Between Sleep Number and Live Ventures

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

By analyzing existing cross correlation between Sleep Number Corp and Live Ventures, you can compare the effects of market volatilities on Sleep Number and Live Ventures 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 Sleep Number with a short position of Live Ventures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sleep Number and Live Ventures.

Diversification Opportunities for Sleep Number and Live Ventures

0.24

Correlation Coefficient

Sleep Number  Live Ventures

Modest diversification

The 3 months correlation between Sleep and Live is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sleep Number Corp and Live Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Ventures and Sleep Number 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 Sleep Number Corp are associated (or correlated) with Live Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Ventures has no effect on the direction of Sleep Number i.e., Sleep Number and Live Ventures go up and down completely randomly.

Pair Corralation between Sleep Number and Live Ventures

Given the investment horizon of 90 days Sleep Number Corp is expected to generate 1.81 times more return on investment than Live Ventures. However, Sleep Number is 1.81 times more volatile than Live Ventures. It trades about 0.1 of its potential returns per unit of risk. Live Ventures is currently generating about -0.04 per unit of risk. If you would invest  1,406  in Sleep Number Corp on March 4, 2024 and sell it today you would earn a total of  106.00  from holding Sleep Number Corp or generate 7.54% return on investment over 90 days.

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

Sleep Number Corp  vs.  Live Ventures

Sleep Number Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sleep Number Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Sleep Number is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Live Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Live Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sleep Number and Live Ventures

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

The idea behind Sleep Number Corp and Live Ventures 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..