Correlation Between Sonata Software and Ankit Metal

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

Diversification Opportunities for Sonata Software and Ankit Metal

0.38

Correlation Coefficient

Sonata Software  Ankit Metal

Weak diversification

The 3 months correlation between Sonata and Ankit is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Ankit Metal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ankit Metal Power 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 Ankit Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ankit Metal Power has no effect on the direction of Sonata Software i.e., Sonata Software and Ankit Metal go up and down completely randomly.

Pair Corralation between Sonata Software and Ankit Metal

Assuming the 90 days trading horizon Sonata Software Limited is expected to generate 0.8 times more return on investment than Ankit Metal. However, Sonata Software Limited is 1.26 times less risky than Ankit Metal. It trades about 0.02 of its potential returns per unit of risk. Ankit Metal Power is currently generating about -0.02 per unit of risk. If you would invest  65,900  in Sonata Software Limited on September 8, 2024 and sell it today you would earn a total of  965.00  from holding Sonata Software Limited or generate 1.46% return on investment over 90 days.

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

Sonata Software Limited  vs.  Ankit Metal Power

Sonata Software

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonata Software Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Ankit Metal Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ankit Metal Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ankit Metal is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sonata Software and Ankit Metal

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

The idea behind Sonata Software Limited and Ankit Metal Power 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.