Correlation Between AECI and Bytes Technology

Can any of the company-specific risk be diversified away by investing in both AECI and Bytes Technology 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 AECI and Bytes Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AECI and Bytes Technology, you can compare the effects of market volatilities on AECI and Bytes Technology 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 AECI with a short position of Bytes Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of AECI and Bytes Technology.

Diversification Opportunities for AECI and Bytes Technology

0.49

Correlation Coefficient

AECI  Bytes Technology

Very weak diversification

The 3 months correlation between AECI and Bytes is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding AECI and Bytes Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bytes Technology and AECI 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 AECI are associated (or correlated) with Bytes Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bytes Technology has no effect on the direction of AECI i.e., AECI and Bytes Technology go up and down completely randomly.

Pair Corralation between AECI and Bytes Technology

Assuming the 90 days trading horizon AECI is expected to generate 4.31 times less return on investment than Bytes Technology. But when comparing it to its historical volatility, AECI is 1.9 times less risky than Bytes Technology. It trades about 0.01 of its potential returns per unit of risk. Bytes Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  823,904  in Bytes Technology on October 12, 2024 and sell it today you would earn a total of  155,396  from holding Bytes Technology or generate 18.86% return on investment over 90 days.

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

AECI  vs.  Bytes Technology

AECI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AECI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bytes Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bytes Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AECI and Bytes Technology

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

The idea behind AECI and Bytes Technology 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.