Correlation Between International Flavors and Sasol

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

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

Diversification Opportunities for International Flavors and Sasol

0.78

Correlation Coefficient

International Flavors  Sasol

Poor diversification

The 3 months correlation between International and Sasol is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding International Flavors Fragranc and Sasol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol and International Flavors 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 International Flavors Fragrances 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 International Flavors i.e., International Flavors and Sasol go up and down completely randomly.

Pair Corralation between International Flavors and Sasol

Considering the 90-day investment horizon International Flavors Fragrances is expected to generate 0.63 times more return on investment than Sasol. However, International Flavors Fragrances is 1.6 times less risky than Sasol. It trades about -0.09 of its potential returns per unit of risk. Sasol is currently generating about -0.14 per unit of risk. If you would invest  10,271  in International Flavors Fragrances on September 4, 2024 and sell it today you would lose (1,144) from holding International Flavors Fragrances or give up 11.14% of portfolio value over 90 days.

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

International Flavors Fragranc  vs.  Sasol

International Flavors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Flavors Fragrances has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with International Flavors and Sasol

The main advantage of trading using opposite International Flavors and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Flavors 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 International Flavors Fragrances 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.