Correlation Between Sonata Software and Jai Balaji

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

Diversification Opportunities for Sonata Software and Jai Balaji

-0.21

Correlation Coefficient

Sonata Software  Jai Balaji

Very good diversification

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

Pair Corralation between Sonata Software and Jai Balaji

Assuming the 90 days trading horizon Sonata Software Limited is expected to under-perform the Jai Balaji. But the stock apears to be less risky and, when comparing its historical volatility, Sonata Software Limited is 23.36 times less risky than Jai Balaji. The stock trades about -0.05 of its potential returns per unit of risk. The Jai Balaji Industries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  21,040  in Jai Balaji Industries on October 23, 2024 and sell it today you would lose (4,835) from holding Jai Balaji Industries or give up 22.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Sonata Software Limited  vs.  Jai Balaji Industries

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 latest unsteady performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Jai Balaji Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jai Balaji Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Jai Balaji sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonata Software and Jai Balaji

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

The idea behind Sonata Software Limited and Jai Balaji Industries 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.