Correlation Between Sasol and Ayo Technology

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

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

Diversification Opportunities for Sasol and Ayo Technology

0.49

Correlation Coefficient

Sasol  Ayo Technology

Very weak diversification

The 3 months correlation between Sasol and Ayo is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Ayo Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayo Technology Solutions and Sasol 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 Sasol Ltd Bee are associated (or correlated) with Ayo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayo Technology Solutions has no effect on the direction of Sasol i.e., Sasol and Ayo Technology go up and down completely randomly.

Pair Corralation between Sasol and Ayo Technology

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to generate 1.59 times more return on investment than Ayo Technology. However, Sasol is 1.59 times more volatile than Ayo Technology Solutions. It trades about 0.11 of its potential returns per unit of risk. Ayo Technology Solutions is currently generating about -0.04 per unit of risk. If you would invest  350,000  in Sasol Ltd Bee on December 22, 2024 and sell it today you would earn a total of  175,100  from holding Sasol Ltd Bee or generate 50.03% return on investment over 90 days.

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

Sasol Ltd Bee  vs.  Ayo Technology Solutions

Sasol Ltd Bee

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sasol Ltd Bee are ranked lower than 9 (%) 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.

Ayo Technology Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ayo Technology Solutions 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sasol and Ayo Technology

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

The idea behind Sasol Ltd Bee and Ayo Technology Solutions 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.