Correlation Between Pick N and Sasol

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

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

Diversification Opportunities for Pick N and Sasol

-0.65

Correlation Coefficient

Pick N  Sasol

Excellent diversification

The 3 months correlation between Pick and Sasol is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pick N Pay 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 Pick N 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 Pick N Pay 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 Pick N i.e., Pick N and Sasol go up and down completely randomly.

Pair Corralation between Pick N and Sasol

Assuming the 90 days trading horizon Pick N Pay is expected to generate 0.15 times more return on investment than Sasol. However, Pick N Pay is 6.47 times less risky than Sasol. It trades about 0.2 of its potential returns per unit of risk. Sasol Ltd Bee is currently generating about 0.01 per unit of risk. If you would invest  260,900  in Pick N Pay on October 20, 2024 and sell it today you would earn a total of  57,100  from holding Pick N Pay or generate 21.89% return on investment over 90 days.

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

Pick N Pay  vs.  Sasol Ltd Bee

Pick N Pay

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pick N Pay are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pick N exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Pick N and Sasol

The main advantage of trading using opposite Pick N and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pick N 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 Pick N Pay 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.