Correlation Between Sonata Software and Allied Blenders

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

Diversification Opportunities for Sonata Software and Allied Blenders

0.81

Correlation Coefficient

Sonata Software  Allied Blenders

Very poor diversification

The 3 months correlation between Sonata and Allied is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Allied Blenders Distillers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Blenders Dist 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 Allied Blenders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Blenders Dist has no effect on the direction of Sonata Software i.e., Sonata Software and Allied Blenders go up and down completely randomly.

Pair Corralation between Sonata Software and Allied Blenders

Assuming the 90 days trading horizon Sonata Software Limited is expected to under-perform the Allied Blenders. But the stock apears to be less risky and, when comparing its historical volatility, Sonata Software Limited is 1.02 times less risky than Allied Blenders. The stock trades about -0.02 of its potential returns per unit of risk. The Allied Blenders Distillers is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  34,955  in Allied Blenders Distillers on September 4, 2024 and sell it today you would lose (405.00) from holding Allied Blenders Distillers or give up 1.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Sonata Software Limited  vs.  Allied Blenders Distillers

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.

Allied Blenders Dist

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Blenders Distillers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allied Blenders is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sonata Software and Allied Blenders

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

The idea behind Sonata Software Limited and Allied Blenders Distillers 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.