Correlation Between Sonata Software and Silver Touch

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

Diversification Opportunities for Sonata Software and Silver Touch

-0.32

Correlation Coefficient

Sonata Software  Silver Touch

Very good diversification

The 3 months correlation between Sonata and Silver is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Silver Touch Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Touch Technologies 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 Silver Touch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Touch Technologies has no effect on the direction of Sonata Software i.e., Sonata Software and Silver Touch go up and down completely randomly.

Pair Corralation between Sonata Software and Silver Touch

Assuming the 90 days trading horizon Sonata Software Limited is expected to generate 2.37 times more return on investment than Silver Touch. However, Sonata Software is 2.37 times more volatile than Silver Touch Technologies. It trades about 0.23 of its potential returns per unit of risk. Silver Touch Technologies is currently generating about -0.1 per unit of risk. If you would invest  54,650  in Sonata Software Limited on September 26, 2024 and sell it today you would earn a total of  7,170  from holding Sonata Software Limited or generate 13.12% return on investment over 90 days.

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

Sonata Software Limited  vs.  Silver Touch Technologies

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.

Silver Touch Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silver Touch Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sonata Software and Silver Touch

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

The idea behind Sonata Software Limited and Silver Touch Technologies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.