Correlation Between Payfare and Lesaka Technologies

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

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

Diversification Opportunities for Payfare and Lesaka Technologies

0.36

Correlation Coefficient

Payfare  Lesaka Technologies

Weak diversification

The 3 months correlation between Payfare and Lesaka is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Payfare and Lesaka Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lesaka Technologies and Payfare 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 Payfare are associated (or correlated) with Lesaka Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lesaka Technologies has no effect on the direction of Payfare i.e., Payfare and Lesaka Technologies go up and down completely randomly.

Pair Corralation between Payfare and Lesaka Technologies

Assuming the 90 days horizon Payfare is expected to generate 0.4 times more return on investment than Lesaka Technologies. However, Payfare is 2.51 times less risky than Lesaka Technologies. It trades about 0.09 of its potential returns per unit of risk. Lesaka Technologies is currently generating about -0.03 per unit of risk. If you would invest  266.00  in Payfare on December 29, 2024 and sell it today you would earn a total of  10.00  from holding Payfare or generate 3.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.13%
Values	Daily Returns

Payfare  vs.  Lesaka Technologies

Payfare

Risk-Adjusted Performance

OK

Over the last 90 days Payfare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Payfare is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Lesaka Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lesaka Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Lesaka Technologies is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Payfare and Lesaka Technologies

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

The idea behind Payfare and Lesaka Technologies 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.