Correlation Between AfroCentric Investment and Sasol

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

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

Diversification Opportunities for AfroCentric Investment and Sasol

0.79

Correlation Coefficient

AfroCentric Investment  Sasol

Poor diversification

The 3 months correlation between AfroCentric and Sasol is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding AfroCentric Investment Corp and Sasol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol and AfroCentric Investment 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 AfroCentric Investment Corp 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 AfroCentric Investment i.e., AfroCentric Investment and Sasol go up and down completely randomly.

Pair Corralation between AfroCentric Investment and Sasol

Assuming the 90 days trading horizon AfroCentric Investment Corp is expected to generate 1.64 times more return on investment than Sasol. However, AfroCentric Investment is 1.64 times more volatile than Sasol. It trades about -0.02 of its potential returns per unit of risk. Sasol is currently generating about -0.07 per unit of risk. If you would invest  32,000  in AfroCentric Investment Corp on October 7, 2024 and sell it today you would lose (12,000) from holding AfroCentric Investment Corp or give up 37.5% of portfolio value over 90 days.

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

AfroCentric Investment Corp  vs.  Sasol

AfroCentric Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AfroCentric Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Sasol

Risk-Adjusted Performance

0 of 100

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 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AfroCentric Investment and Sasol

The main advantage of trading using opposite AfroCentric Investment and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AfroCentric Investment 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 AfroCentric Investment Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .