Correlation Between Bytes Technology and Octodec

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

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

Diversification Opportunities for Bytes Technology and Octodec

-0.19

Correlation Coefficient

Bytes Technology  Octodec

Good diversification

The 3 months correlation between Bytes and Octodec is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bytes Technology and Octodec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Octodec 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 Octodec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Octodec has no effect on the direction of Bytes Technology i.e., Bytes Technology and Octodec go up and down completely randomly.

Pair Corralation between Bytes Technology and Octodec

Assuming the 90 days trading horizon Bytes Technology is expected to under-perform the Octodec. But the stock apears to be less risky and, when comparing its historical volatility, Bytes Technology is 1.07 times less risky than Octodec. The stock trades about -0.09 of its potential returns per unit of risk. The Octodec is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  120,300  in Octodec on October 6, 2024 and sell it today you would lose (6,300) from holding Octodec or give up 5.24% of portfolio value over 90 days.

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

Bytes Technology  vs.  Octodec

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.

Octodec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Octodec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Octodec is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bytes Technology and Octodec

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

The idea behind Bytes Technology and Octodec 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 Anywhere module to track or share privately all of your investments from the convenience of any device.