Correlation Between Affinity and Sasol

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

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

Diversification Opportunities for Affinity and Sasol

-0.47

Correlation Coefficient

Affinity  Sasol

Very good diversification

The 3 months correlation between Affinity and Sasol is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Affinity Ci Growth 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 Affinity 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 Affinity Ci Growth 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 Affinity i.e., Affinity and Sasol go up and down completely randomly.

Pair Corralation between Affinity and Sasol

Assuming the 90 days trading horizon Affinity is expected to generate 3.39 times less return on investment than Sasol. But when comparing it to its historical volatility, Affinity Ci Growth is 21.44 times less risky than Sasol. It trades about 0.05 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 27, 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	Very Weak
Accuracy	96.72%
Values	Daily Returns

Affinity Ci Growth  vs.  Sasol Ltd Bee

Affinity Ci Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Ci Growth are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Affinity 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

Very 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 Affinity and Sasol

The main advantage of trading using opposite Affinity and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affinity 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 Affinity Ci Growth 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.