Correlation Between Sonata Software and Max Healthcare

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

Diversification Opportunities for Sonata Software and Max Healthcare

0.21

Correlation Coefficient

Sonata Software  Max Healthcare

Modest diversification

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

Pair Corralation between Sonata Software and Max Healthcare

Assuming the 90 days trading horizon Sonata Software is expected to generate 25.34 times less return on investment than Max Healthcare. In addition to that, Sonata Software is 1.01 times more volatile than Max Healthcare Institute. It trades about 0.01 of its total potential returns per unit of risk. Max Healthcare Institute is currently generating about 0.17 per unit of volatility. If you would invest  93,100  in Max Healthcare Institute on September 14, 2024 and sell it today you would earn a total of  23,670  from holding Max Healthcare Institute or generate 25.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Sonata Software Limited  vs.  Max Healthcare Institute

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 newest stock price disarray, may contribute to short-term losses for the investors.

Max Healthcare Institute

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Max Healthcare Institute are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Max Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonata Software and Max Healthcare

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

The idea behind Sonata Software Limited and Max Healthcare Institute 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.