Correlation Between Bytes Technology and Absa

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

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

Diversification Opportunities for Bytes Technology and Absa

-0.5

Correlation Coefficient

Bytes Technology  Absa

Very good diversification

The 3 months correlation between Bytes and Absa is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bytes Technology and Absa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group and Bytes Technology 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 Bytes Technology are associated (or correlated) with Absa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absa Group has no effect on the direction of Bytes Technology i.e., Bytes Technology and Absa go up and down completely randomly.

Pair Corralation between Bytes Technology and Absa

Assuming the 90 days trading horizon Bytes Technology is expected to under-perform the Absa. In addition to that, Bytes Technology is 1.36 times more volatile than Absa Group. It trades about -0.04 of its total potential returns per unit of risk. Absa Group is currently generating about 0.07 per unit of volatility. If you would invest  1,457,526  in Absa Group on October 5, 2024 and sell it today you would earn a total of  434,674  from holding Absa Group or generate 29.82% return on investment over 90 days.

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

Bytes Technology  vs.  Absa Group

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 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.

Absa Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Absa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bytes Technology and Absa

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

The idea behind Bytes Technology and Absa Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.