Correlation Between Sonata Software and Le Travenues

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

Diversification Opportunities for Sonata Software and Le Travenues

0.21

Correlation Coefficient

Sonata Software  Le Travenues

Modest diversification

The 3 months correlation between Sonata and IXIGO is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Le Travenues Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Le Travenues Technology 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 Le Travenues. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Le Travenues Technology has no effect on the direction of Sonata Software i.e., Sonata Software and Le Travenues go up and down completely randomly.

Pair Corralation between Sonata Software and Le Travenues

Assuming the 90 days trading horizon Sonata Software Limited is expected to under-perform the Le Travenues. But the stock apears to be less risky and, when comparing its historical volatility, Sonata Software Limited is 2.06 times less risky than Le Travenues. The stock trades about -0.37 of its potential returns per unit of risk. The Le Travenues Technology is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  15,848  in Le Travenues Technology on October 20, 2024 and sell it today you would lose (1,377) from holding Le Travenues Technology or give up 8.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Sonata Software Limited  vs.  Le Travenues Technology

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.

Le Travenues Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sonata Software and Le Travenues

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

The idea behind Sonata Software Limited and Le Travenues Technology 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..