Correlation Between Sasol and Coronation Top

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

By analyzing existing cross correlation between Sasol Ltd Bee and Coronation Top 20, you can compare the effects of market volatilities on Sasol and Coronation Top 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 Coronation Top. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sasol and Coronation Top.

Diversification Opportunities for Sasol and Coronation Top

-0.33

Correlation Coefficient

Sasol  Coronation Top

Very good diversification

The 3 months correlation between Sasol and Coronation is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Coronation Top 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Top 20 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 Ltd Bee are associated (or correlated) with Coronation Top. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Top 20 has no effect on the direction of Sasol i.e., Sasol and Coronation Top go up and down completely randomly.

Pair Corralation between Sasol and Coronation Top

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to under-perform the Coronation Top. In addition to that, Sasol is 5.14 times more volatile than Coronation Top 20. It trades about -0.18 of its total potential returns per unit of risk. Coronation Top 20 is currently generating about 0.19 per unit of volatility. If you would invest  21,223  in Coronation Top 20 on December 5, 2024 and sell it today you would earn a total of  952.00  from holding Coronation Top 20 or generate 4.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Sasol Ltd Bee  vs.  Coronation Top 20

Sasol Ltd Bee

Risk-Adjusted Performance

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 unsteady fundamental drivers, Sasol may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Coronation Top 20

Risk-Adjusted Performance

Weak

Over the last 90 days Coronation Top 20 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Coronation Top is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sasol and Coronation Top

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

The idea behind Sasol Ltd Bee and Coronation Top 20 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.