Correlation Between Sonata Software and Vinati Organics

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

Diversification Opportunities for Sonata Software and Vinati Organics

-0.02

Correlation Coefficient

Sonata Software  Vinati Organics

Good diversification

The 3 months correlation between Sonata and Vinati is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Vinati Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vinati Organics 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 Vinati Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vinati Organics has no effect on the direction of Sonata Software i.e., Sonata Software and Vinati Organics go up and down completely randomly.

Pair Corralation between Sonata Software and Vinati Organics

Assuming the 90 days trading horizon Sonata Software Limited is expected to generate 5.21 times more return on investment than Vinati Organics. However, Sonata Software is 5.21 times more volatile than Vinati Organics Limited. It trades about 0.05 of its potential returns per unit of risk. Vinati Organics Limited is currently generating about -0.02 per unit of risk. If you would invest  28,265  in Sonata Software Limited on September 25, 2024 and sell it today you would earn a total of  33,885  from holding Sonata Software Limited or generate 119.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Sonata Software Limited  vs.  Vinati Organics Limited

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.

Vinati Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vinati Organics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sonata Software and Vinati Organics

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

The idea behind Sonata Software Limited and Vinati Organics Limited 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..