Correlation Between Blue Label and Sasol

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

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

Diversification Opportunities for Blue Label and Sasol

-0.42

Correlation Coefficient

Blue Label  Sasol

Very good diversification

The 3 months correlation between Blue and Sasol is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Sasol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol and Blue Label 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 Blue Label Telecoms 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 Blue Label i.e., Blue Label and Sasol go up and down completely randomly.

Pair Corralation between Blue Label and Sasol

Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 0.72 times more return on investment than Sasol. However, Blue Label Telecoms is 1.39 times less risky than Sasol. It trades about 0.12 of its potential returns per unit of risk. Sasol is currently generating about -0.14 per unit of risk. If you would invest  42,800  in Blue Label Telecoms on October 10, 2024 and sell it today you would earn a total of  13,700  from holding Blue Label Telecoms or generate 32.01% return on investment over 90 days.

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

Blue Label Telecoms  vs.  Sasol

Blue Label Telecoms

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Label Telecoms are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Blue Label is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the 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 weak 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 Blue Label and Sasol

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