Correlation Between Sasol and Quantum Foods

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

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

Diversification Opportunities for Sasol and Quantum Foods

0.71

Correlation Coefficient

Sasol  Quantum Foods

Poor diversification

The 3 months correlation between Sasol and Quantum is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sasol and Quantum Foods Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantum Foods 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 Quantum Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantum Foods Holdings has no effect on the direction of Sasol i.e., Sasol and Quantum Foods go up and down completely randomly.

Pair Corralation between Sasol and Quantum Foods

Assuming the 90 days trading horizon Sasol is expected to generate 0.44 times more return on investment than Quantum Foods. However, Sasol is 2.3 times less risky than Quantum Foods. It trades about -0.01 of its potential returns per unit of risk. Quantum Foods Holdings is currently generating about -0.1 per unit of risk. If you would invest  1,039,200  in Sasol on October 23, 2024 and sell it today you would lose (59,200) from holding Sasol or give up 5.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Sasol  vs.  Quantum Foods Holdings

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 rather sound technical and fundamental indicators, Sasol is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Quantum Foods Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantum Foods Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sasol and Quantum Foods

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

The idea behind Sasol and Quantum Foods 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.