Correlation Between Bytes Technology and African Media

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

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

Diversification Opportunities for Bytes Technology and African Media

-0.39

Correlation Coefficient

Bytes Technology  African Media

Very good diversification

The 3 months correlation between Bytes and African is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bytes Technology and African Media Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Media Entert 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 African Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Media Entert has no effect on the direction of Bytes Technology i.e., Bytes Technology and African Media go up and down completely randomly.

Pair Corralation between Bytes Technology and African Media

Assuming the 90 days trading horizon Bytes Technology is expected to under-perform the African Media. But the stock apears to be less risky and, when comparing its historical volatility, Bytes Technology is 1.65 times less risky than African Media. The stock trades about -0.22 of its potential returns per unit of risk. The African Media Entertainment is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  378,585  in African Media Entertainment on September 26, 2024 and sell it today you would earn a total of  51,315  from holding African Media Entertainment or generate 13.55% return on investment over 90 days.

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

Bytes Technology  vs.  African Media Entertainment

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

African Media Entert

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in African Media Entertainment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, African Media exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bytes Technology and African Media

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

The idea behind Bytes Technology and African Media Entertainment 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..