Correlation Between Sonata Software and Compucom Software

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

Diversification Opportunities for Sonata Software and Compucom Software

0.43

Correlation Coefficient

Sonata Software  Compucom Software

Very weak diversification

The 3 months correlation between Sonata and Compucom is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Compucom Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compucom Software 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 Compucom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compucom Software has no effect on the direction of Sonata Software i.e., Sonata Software and Compucom Software go up and down completely randomly.

Pair Corralation between Sonata Software and Compucom Software

Assuming the 90 days trading horizon Sonata Software Limited is expected to under-perform the Compucom Software. But the stock apears to be less risky and, when comparing its historical volatility, Sonata Software Limited is 1.09 times less risky than Compucom Software. The stock trades about -0.07 of its potential returns per unit of risk. The Compucom Software Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,964  in Compucom Software Limited on May 5, 2025 and sell it today you would earn a total of  61.00  from holding Compucom Software Limited or generate 3.11% 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.  Compucom Software Limited

Sonata Software

Risk-Adjusted Performance

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 latest inconsistent performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Compucom Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compucom Software Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Compucom Software is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sonata Software and Compucom Software

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

The idea behind Sonata Software Limited and Compucom Software 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.