Correlation Between Sonata Software and Keynote Financial

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

Diversification Opportunities for Sonata Software and Keynote Financial

0.25

Correlation Coefficient

Sonata Software  Keynote Financial

Modest diversification

The 3 months correlation between Sonata and Keynote is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Keynote Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keynote Financial 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 Keynote Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keynote Financial has no effect on the direction of Sonata Software i.e., Sonata Software and Keynote Financial go up and down completely randomly.

Pair Corralation between Sonata Software and Keynote Financial

Assuming the 90 days trading horizon Sonata Software Limited is expected to generate 1.9 times more return on investment than Keynote Financial. However, Sonata Software is 1.9 times more volatile than Keynote Financial Services. It trades about 0.05 of its potential returns per unit of risk. Keynote Financial Services is currently generating about 0.07 per unit of risk. If you would invest  30,372  in Sonata Software Limited on October 23, 2024 and sell it today you would earn a total of  25,648  from holding Sonata Software Limited or generate 84.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Sonata Software Limited  vs.  Keynote Financial Services

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.

Keynote Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keynote Financial Services 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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sonata Software and Keynote Financial

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

The idea behind Sonata Software Limited and Keynote Financial Services 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.