Correlation Between Sonata Software and Sukhjit Starch

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

Diversification Opportunities for Sonata Software and Sukhjit Starch

0.62

Correlation Coefficient

Sonata Software  Sukhjit Starch

Poor diversification

The 3 months correlation between Sonata and Sukhjit is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Sukhjit Starch Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sukhjit Starch Chemicals 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 Sukhjit Starch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sukhjit Starch Chemicals has no effect on the direction of Sonata Software i.e., Sonata Software and Sukhjit Starch go up and down completely randomly.

Pair Corralation between Sonata Software and Sukhjit Starch

Assuming the 90 days trading horizon Sonata Software Limited is expected to generate 0.77 times more return on investment than Sukhjit Starch. However, Sonata Software Limited is 1.3 times less risky than Sukhjit Starch. It trades about -0.23 of its potential returns per unit of risk. Sukhjit Starch Chemicals is currently generating about -0.3 per unit of risk. If you would invest  66,910  in Sonata Software Limited on October 9, 2024 and sell it today you would lose (5,025) from holding Sonata Software Limited or give up 7.51% of portfolio value over 90 days.

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

Sonata Software Limited  vs.  Sukhjit Starch Chemicals

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.

Sukhjit Starch Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sukhjit Starch Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward 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 Sukhjit Starch

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

The idea behind Sonata Software Limited and Sukhjit Starch Chemicals 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.

Check out your portfolio center.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.