Correlation Between Bid and Sasol

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

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

Diversification Opportunities for Bid and Sasol

-0.1

Correlation Coefficient

Bid  Sasol

Good diversification

The 3 months correlation between Bid and Sasol is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bid Corp. 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 Bid 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 Bid Corporation 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 Bid i.e., Bid and Sasol go up and down completely randomly.

Pair Corralation between Bid and Sasol

Assuming the 90 days trading horizon Bid Corporation is expected to generate 0.25 times more return on investment than Sasol. However, Bid Corporation is 3.97 times less risky than Sasol. It trades about 0.03 of its potential returns per unit of risk. Sasol Ltd Bee is currently generating about 0.0 per unit of risk. If you would invest  3,877,659  in Bid Corporation on October 24, 2024 and sell it today you would earn a total of  706,441  from holding Bid Corporation or generate 18.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Bid Corp.  vs.  Sasol Ltd Bee

Bid Corporation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bid Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bid may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 Bid and Sasol

The main advantage of trading using opposite Bid and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bid 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 Bid Corporation 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.