Correlation Between Sonata Software and Imagicaaworld Entertainment

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

Diversification Opportunities for Sonata Software and Imagicaaworld Entertainment

0.52

Correlation Coefficient

Sonata Software  Imagicaaworld Entertainment

Very weak diversification

The 3 months correlation between Sonata and Imagicaaworld is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Imagicaaworld Entertainment Li in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imagicaaworld Entertainment 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 Imagicaaworld Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imagicaaworld Entertainment has no effect on the direction of Sonata Software i.e., Sonata Software and Imagicaaworld Entertainment go up and down completely randomly.

Pair Corralation between Sonata Software and Imagicaaworld Entertainment

Assuming the 90 days trading horizon Sonata Software Limited is expected to under-perform the Imagicaaworld Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Sonata Software Limited is 1.07 times less risky than Imagicaaworld Entertainment. The stock trades about -0.28 of its potential returns per unit of risk. The Imagicaaworld Entertainment Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6,935  in Imagicaaworld Entertainment Limited on December 30, 2024 and sell it today you would lose (324.00) from holding Imagicaaworld Entertainment Limited or give up 4.67% of portfolio value over 90 days.

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

Sonata Software Limited  vs.  Imagicaaworld Entertainment Li

Sonata Software

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Imagicaaworld Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Imagicaaworld Entertainment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Imagicaaworld Entertainment is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sonata Software and Imagicaaworld Entertainment

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

The idea behind Sonata Software Limited and Imagicaaworld Entertainment 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.