Correlation Between Sasol and Granprade

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

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

Diversification Opportunities for Sasol and Granprade

0.75

Correlation Coefficient

Sasol  Granprade

Poor diversification

The 3 months correlation between Sasol and Granprade is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sasol and Granprade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granprade and Sasol 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 Sasol are associated (or correlated) with Granprade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granprade has no effect on the direction of Sasol i.e., Sasol and Granprade go up and down completely randomly.

Pair Corralation between Sasol and Granprade

Assuming the 90 days trading horizon Sasol is expected to under-perform the Granprade. In addition to that, Sasol is 1.52 times more volatile than Granprade. It trades about -0.22 of its total potential returns per unit of risk. Granprade is currently generating about -0.09 per unit of volatility. If you would invest  36,800  in Granprade on September 24, 2024 and sell it today you would lose (3,800) from holding Granprade or give up 10.33% of portfolio value over 90 days.

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

Sasol  vs.  Granprade

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Granprade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Granprade has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sasol and Granprade

The main advantage of trading using opposite Sasol and Granprade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sasol position performs unexpectedly, Granprade 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 Granprade will offset losses from the drop in Granprade's long position.

The idea behind Sasol and Granprade 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.