Correlation Between Allan Gray and Sasol

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

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

Diversification Opportunities for Allan Gray and Sasol

-0.66

Correlation Coefficient

Allan Gray  Sasol

Excellent diversification

The 3 months correlation between Allan and Sasol is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Allan Gray Equity and Sasol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol and Allan Gray 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 Allan Gray Equity 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 has no effect on the direction of Allan Gray i.e., Allan Gray and Sasol go up and down completely randomly.

Pair Corralation between Allan Gray and Sasol

Assuming the 90 days trading horizon Allan Gray Equity is expected to generate 0.15 times more return on investment than Sasol. However, Allan Gray Equity is 6.49 times less risky than Sasol. It trades about 0.08 of its potential returns per unit of risk. Sasol is currently generating about -0.03 per unit of risk. If you would invest  60,691  in Allan Gray Equity on December 25, 2024 and sell it today you would earn a total of  1,628  from holding Allan Gray Equity or generate 2.68% return on investment over 90 days.

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

Allan Gray Equity  vs.  Sasol

Allan Gray Equity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Allan Gray Equity are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Allan Gray is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Sasol

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sasol has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Allan Gray and Sasol

The main advantage of trading using opposite Allan Gray and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allan Gray 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 Allan Gray Equity and Sasol 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.