Correlation Between Bytes Technology and Moonpig Group

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

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

Diversification Opportunities for Bytes Technology and Moonpig Group

-0.54

Correlation Coefficient

Bytes Technology  Moonpig Group

Excellent diversification

The 3 months correlation between Bytes and Moonpig is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bytes Technology and Moonpig Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moonpig Group PLC 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 Moonpig Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moonpig Group PLC has no effect on the direction of Bytes Technology i.e., Bytes Technology and Moonpig Group go up and down completely randomly.

Pair Corralation between Bytes Technology and Moonpig Group

Assuming the 90 days trading horizon Bytes Technology is expected to generate 5.41 times less return on investment than Moonpig Group. But when comparing it to its historical volatility, Bytes Technology is 1.28 times less risky than Moonpig Group. It trades about 0.02 of its potential returns per unit of risk. Moonpig Group PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  19,980  in Moonpig Group PLC on September 12, 2024 and sell it today you would earn a total of  2,870  from holding Moonpig Group PLC or generate 14.36% 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.  Moonpig Group PLC

Bytes Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bytes Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bytes Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Moonpig Group PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moonpig Group PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Moonpig Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bytes Technology and Moonpig Group

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

The idea behind Bytes Technology and Moonpig Group PLC 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.