Correlation Between Sonata Software and Clean Science

Can any of the company-specific risk be diversified away by investing in both Sonata Software and Clean Science 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 Clean Science 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 Clean Science and, you can compare the effects of market volatilities on Sonata Software and Clean Science 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 Clean Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonata Software and Clean Science.

Diversification Opportunities for Sonata Software and Clean Science

0.06

Correlation Coefficient

Sonata Software  Clean Science

Significant diversification

The 3 months correlation between Sonata and Clean is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Clean Science and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Science 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 Clean Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Science has no effect on the direction of Sonata Software i.e., Sonata Software and Clean Science go up and down completely randomly.

Pair Corralation between Sonata Software and Clean Science

Assuming the 90 days trading horizon Sonata Software Limited is expected to under-perform the Clean Science. But the stock apears to be less risky and, when comparing its historical volatility, Sonata Software Limited is 1.76 times less risky than Clean Science. The stock trades about -0.17 of its potential returns per unit of risk. The Clean Science and is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  128,715  in Clean Science and on October 5, 2024 and sell it today you would earn a total of  22,685  from holding Clean Science and or generate 17.62% return on investment over 90 days.

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

Sonata Software Limited  vs.  Clean Science and

Sonata Software

Risk-Adjusted Performance

3 of 100

Weak

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

Clean Science

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Science and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Clean Science is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sonata Software and Clean Science

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

The idea behind Sonata Software Limited and Clean Science and 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.