Correlation Between Coronation Balanced and Sasol

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

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

Diversification Opportunities for Coronation Balanced and Sasol

-0.65

Correlation Coefficient

Coronation Balanced  Sasol

Excellent diversification

The 3 months correlation between Coronation and Sasol is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Coronation Balanced Plus 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 Coronation Balanced 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 Coronation Balanced Plus 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 Coronation Balanced i.e., Coronation Balanced and Sasol go up and down completely randomly.

Pair Corralation between Coronation Balanced and Sasol

Assuming the 90 days trading horizon Coronation Balanced is expected to generate 1.8 times less return on investment than Sasol. But when comparing it to its historical volatility, Coronation Balanced Plus is 20.88 times less risky than Sasol. It trades about 0.1 of its potential returns per unit of risk. Sasol Ltd Bee is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,020,000  in Sasol Ltd Bee on October 23, 2024 and sell it today you would lose (310,000) from holding Sasol Ltd Bee or give up 30.39% of portfolio value over 90 days.

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

Coronation Balanced Plus  vs.  Sasol Ltd Bee

Coronation Balanced Plus

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Balanced Plus are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Coronation Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sasol Ltd Bee

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Sasol Ltd Bee has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Sasol is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coronation Balanced and Sasol

The main advantage of trading using opposite Coronation Balanced and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coronation Balanced 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 Coronation Balanced Plus 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.