Correlation Between Sonata Software and Angel One

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

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

Diversification Opportunities for Sonata Software and Angel One

0.75

Correlation Coefficient

Sonata Software  Angel One

Poor diversification

The 3 months correlation between Sonata and Angel is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Angel One Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel One Limited and Sonata Software 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 Sonata Software Limited are associated (or correlated) with Angel One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel One Limited has no effect on the direction of Sonata Software i.e., Sonata Software and Angel One go up and down completely randomly.

Pair Corralation between Sonata Software and Angel One

Assuming the 90 days trading horizon Sonata Software is expected to generate 1.09 times less return on investment than Angel One. But when comparing it to its historical volatility, Sonata Software Limited is 1.44 times less risky than Angel One. It trades about 0.06 of its potential returns per unit of risk. Angel One Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  260,655  in Angel One Limited on October 10, 2024 and sell it today you would earn a total of  15,490  from holding Angel One Limited or generate 5.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Sonata Software Limited  vs.  Angel One Limited

Sonata Software

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sonata Software Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Sonata Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Angel One Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Angel One Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Angel One may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sonata Software and Angel One

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

The idea behind Sonata Software Limited and Angel One 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.