Correlation Between Prosus NV and Sasol

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

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

Diversification Opportunities for Prosus NV and Sasol

0.17

Correlation Coefficient

Prosus NV  Sasol

Average diversification

The 3 months correlation between Prosus and Sasol is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV 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 Prosus NV 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 Prosus NV 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 Prosus NV i.e., Prosus NV and Sasol go up and down completely randomly.

Pair Corralation between Prosus NV and Sasol

Assuming the 90 days trading horizon Prosus NV is expected to under-perform the Sasol. But the stock apears to be less risky and, when comparing its historical volatility, Prosus NV is 18.91 times less risky than Sasol. The stock trades about -0.22 of its potential returns per unit of risk. The Sasol Ltd Bee is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  800,000  in Sasol Ltd Bee on October 9, 2024 and sell it today you would lose (170,000) from holding Sasol Ltd Bee or give up 21.25% of portfolio value over 90 days.

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

Prosus NV  vs.  Sasol Ltd Bee

Prosus NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosus NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Prosus NV is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest unsteady performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Prosus NV and Sasol

The main advantage of trading using opposite Prosus NV and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus NV 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 Prosus NV 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.