Correlation Between Sonata Software and Karur Vysya

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

Diversification Opportunities for Sonata Software and Karur Vysya

0.66

Correlation Coefficient

Sonata Software  Karur Vysya

Poor diversification

The 3 months correlation between Sonata and Karur is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Karur Vysya Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karur Vysya Bank 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 Karur Vysya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karur Vysya Bank has no effect on the direction of Sonata Software i.e., Sonata Software and Karur Vysya go up and down completely randomly.

Pair Corralation between Sonata Software and Karur Vysya

Assuming the 90 days trading horizon Sonata Software is expected to generate 1.23 times less return on investment than Karur Vysya. In addition to that, Sonata Software is 1.18 times more volatile than Karur Vysya Bank. It trades about 0.06 of its total potential returns per unit of risk. Karur Vysya Bank is currently generating about 0.09 per unit of volatility. If you would invest  19,820  in Karur Vysya Bank on October 9, 2024 and sell it today you would earn a total of  1,974  from holding Karur Vysya Bank or generate 9.96% return on investment over 90 days.

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

Sonata Software Limited  vs.  Karur Vysya Bank

Sonata Software

Risk-Adjusted Performance

4 of 100

Modest

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.

Karur Vysya Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Karur Vysya Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Karur Vysya may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sonata Software and Karur Vysya

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

The idea behind Sonata Software Limited and Karur Vysya Bank 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.