Correlation Between Manaksia Coated and Sonata Software

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

By analyzing existing cross correlation between Manaksia Coated Metals and Sonata Software Limited, you can compare the effects of market volatilities on Manaksia Coated and Sonata Software 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 Manaksia Coated with a short position of Sonata Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manaksia Coated and Sonata Software.

Diversification Opportunities for Manaksia Coated and Sonata Software

0.56

Correlation Coefficient

Manaksia Coated  Sonata Software

Very weak diversification

The 3 months correlation between Manaksia and Sonata is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Manaksia Coated Metals and Sonata Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonata Software and Manaksia Coated 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 Manaksia Coated Metals are associated (or correlated) with Sonata Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonata Software has no effect on the direction of Manaksia Coated i.e., Manaksia Coated and Sonata Software go up and down completely randomly.

Pair Corralation between Manaksia Coated and Sonata Software

Assuming the 90 days trading horizon Manaksia Coated Metals is expected to generate 2.4 times more return on investment than Sonata Software. However, Manaksia Coated is 2.4 times more volatile than Sonata Software Limited. It trades about 0.56 of its potential returns per unit of risk. Sonata Software Limited is currently generating about -0.24 per unit of risk. If you would invest  8,186  in Manaksia Coated Metals on October 4, 2024 and sell it today you would earn a total of  3,611  from holding Manaksia Coated Metals or generate 44.11% return on investment over 90 days.

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

Manaksia Coated Metals  vs.  Sonata Software Limited

Manaksia Coated Metals

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Manaksia Coated Metals are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Manaksia Coated displayed solid returns over the last few months and may actually be approaching a breakup point.

Sonata Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonata Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Sonata Software is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Manaksia Coated and Sonata Software

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

The idea behind Manaksia Coated Metals and Sonata Software Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.