Correlation Between Bytes Technology and Sasol

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

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

Diversification Opportunities for Bytes Technology and Sasol

-0.13

Correlation Coefficient

Bytes Technology  Sasol

Good diversification

The 3 months correlation between Bytes and Sasol is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bytes Technology and Sasol Ltd Bee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol Ltd Bee 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 Sasol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sasol Ltd Bee has no effect on the direction of Bytes Technology i.e., Bytes Technology and Sasol go up and down completely randomly.

Pair Corralation between Bytes Technology and Sasol

Assuming the 90 days trading horizon Bytes Technology is expected to generate 1.59 times less return on investment than Sasol. But when comparing it to its historical volatility, Bytes Technology is 2.87 times less risky than Sasol. It trades about 0.13 of its potential returns per unit of risk. Sasol Ltd Bee is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  420,000  in Sasol Ltd Bee on December 30, 2024 and sell it today you would earn a total of  85,000  from holding Sasol Ltd Bee or generate 20.24% 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.  Sasol Ltd Bee

Bytes Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bytes Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bytes Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sasol Ltd Bee

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sasol Ltd Bee are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Sasol sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bytes Technology and Sasol

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

The idea behind Bytes Technology and Sasol Ltd Bee 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.