Correlation Between Sonata Software and Sunflag Iron

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

Diversification Opportunities for Sonata Software and Sunflag Iron

0.4

Correlation Coefficient

Sonata Software  Sunflag Iron

Very weak diversification

The 3 months correlation between Sonata and Sunflag is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Sunflag Iron And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunflag Iron And 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 Sunflag Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunflag Iron And has no effect on the direction of Sonata Software i.e., Sonata Software and Sunflag Iron go up and down completely randomly.

Pair Corralation between Sonata Software and Sunflag Iron

Assuming the 90 days trading horizon Sonata Software is expected to generate 13.02 times less return on investment than Sunflag Iron. But when comparing it to its historical volatility, Sonata Software Limited is 1.02 times less risky than Sunflag Iron. It trades about 0.0 of its potential returns per unit of risk. Sunflag Iron And is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  20,824  in Sunflag Iron And on September 12, 2024 and sell it today you would earn a total of  1,313  from holding Sunflag Iron And or generate 6.31% return on investment over 90 days.

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

Sonata Software Limited  vs.  Sunflag Iron And

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

Sunflag Iron And

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sunflag Iron And are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Sunflag Iron may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sonata Software and Sunflag Iron

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

The idea behind Sonata Software Limited and Sunflag Iron And 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.