Correlation Between Sonata Software and Shree Rama

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

Diversification Opportunities for Sonata Software and Shree Rama

0.48

Correlation Coefficient

Sonata Software  Shree Rama

Very weak diversification

The 3 months correlation between Sonata and Shree is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Shree Rama Multi Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shree Rama Multi 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 Shree Rama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shree Rama Multi has no effect on the direction of Sonata Software i.e., Sonata Software and Shree Rama go up and down completely randomly.

Pair Corralation between Sonata Software and Shree Rama

Assuming the 90 days trading horizon Sonata Software Limited is expected to generate 1.13 times more return on investment than Shree Rama. However, Sonata Software is 1.13 times more volatile than Shree Rama Multi Tech. It trades about 0.16 of its potential returns per unit of risk. Shree Rama Multi Tech is currently generating about 0.12 per unit of risk. If you would invest  33,207  in Sonata Software Limited on April 25, 2025 and sell it today you would earn a total of  9,613  from holding Sonata Software Limited or generate 28.95% return on investment over 90 days.

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

Sonata Software Limited  vs.  Shree Rama Multi Tech

Sonata Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sonata Software Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Sonata Software displayed solid returns over the last few months and may actually be approaching a breakup point.

Shree Rama Multi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shree Rama Multi Tech are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shree Rama sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonata Software and Shree Rama

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

The idea behind Sonata Software Limited and Shree Rama Multi Tech 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.