Correlation Between Sonata Software and Ratnamani Metals

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

Diversification Opportunities for Sonata Software and Ratnamani Metals

0.47

Correlation Coefficient

Sonata Software  Ratnamani Metals

Very weak diversification

The 3 months correlation between Sonata and Ratnamani is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sonata Software Limited and Ratnamani Metals Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratnamani Metals Tubes 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 Ratnamani Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratnamani Metals Tubes has no effect on the direction of Sonata Software i.e., Sonata Software and Ratnamani Metals go up and down completely randomly.

Pair Corralation between Sonata Software and Ratnamani Metals

Assuming the 90 days trading horizon Sonata Software Limited is expected to under-perform the Ratnamani Metals. In addition to that, Sonata Software is 1.56 times more volatile than Ratnamani Metals Tubes. It trades about -0.05 of its total potential returns per unit of risk. Ratnamani Metals Tubes is currently generating about -0.04 per unit of volatility. If you would invest  262,140  in Ratnamani Metals Tubes on May 7, 2025 and sell it today you would lose (11,520) from holding Ratnamani Metals Tubes or give up 4.39% of portfolio value over 90 days.

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

Sonata Software Limited  vs.  Ratnamani Metals Tubes

Sonata Software

Risk-Adjusted Performance

Weakest

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 weak 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.

Ratnamani Metals Tubes

Risk-Adjusted Performance

Weakest

Over the last 90 days Ratnamani Metals Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ratnamani Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sonata Software and Ratnamani Metals

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

The idea behind Sonata Software Limited and Ratnamani Metals Tubes 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.