Correlation Between Sasol and ISA Holdings

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

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

Diversification Opportunities for Sasol and ISA Holdings

-0.07

Correlation Coefficient

Sasol  ISA Holdings

Good diversification

The 3 months correlation between Sasol and ISA is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sasol and ISA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISA Holdings 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 ISA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISA Holdings has no effect on the direction of Sasol i.e., Sasol and ISA Holdings go up and down completely randomly.

Pair Corralation between Sasol and ISA Holdings

Assuming the 90 days trading horizon Sasol is expected to under-perform the ISA Holdings. In addition to that, Sasol is 1.72 times more volatile than ISA Holdings. It trades about -0.08 of its total potential returns per unit of risk. ISA Holdings is currently generating about -0.11 per unit of volatility. If you would invest  19,700  in ISA Holdings on December 4, 2024 and sell it today you would lose (800.00) from holding ISA Holdings or give up 4.06% of portfolio value over 90 days.

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

Sasol  vs.  ISA Holdings

Sasol

Risk-Adjusted Performance

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 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.

ISA Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sasol and ISA Holdings

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

The idea behind Sasol and ISA Holdings 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 Commodity Directory module to find actively traded commodities issued by global exchanges.