Correlation Between JSE and Sasol

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

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

Diversification Opportunities for JSE and Sasol

-0.56

Correlation Coefficient

JSE  Sasol

Excellent diversification

The 3 months correlation between JSE and Sasol is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding JSE Limited 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 JSE 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 JSE Limited 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 JSE i.e., JSE and Sasol go up and down completely randomly.

Pair Corralation between JSE and Sasol

Assuming the 90 days trading horizon JSE is expected to generate 5.48 times less return on investment than Sasol. But when comparing it to its historical volatility, JSE Limited is 5.81 times less risky than Sasol. It trades about 0.08 of its potential returns per unit of risk. Sasol Ltd Bee is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  420,000  in Sasol Ltd Bee on December 27, 2024 and sell it today you would earn a total of  100,000  from holding Sasol Ltd Bee or generate 23.81% return on investment over 90 days.

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

JSE Limited  vs.  Sasol Ltd Bee

JSE Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JSE Limited 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, JSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sasol Ltd Bee

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sasol Ltd Bee are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Sasol sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JSE and Sasol

The main advantage of trading using opposite JSE and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JSE 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 JSE Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.