Correlation Between Sasol and 1nvest High

Can any of the company-specific risk be diversified away by investing in both Sasol and 1nvest High 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 1nvest High 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 1nvest High Equity, you can compare the effects of market volatilities on Sasol and 1nvest High 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 1nvest High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sasol and 1nvest High.

Diversification Opportunities for Sasol and 1nvest High

-0.21

Correlation Coefficient

Sasol  1nvest High

Very good diversification

The 3 months correlation between Sasol and 1nvest is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and 1nvest High Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1nvest High Equity 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 1nvest High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1nvest High Equity has no effect on the direction of Sasol i.e., Sasol and 1nvest High go up and down completely randomly.

Pair Corralation between Sasol and 1nvest High

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to generate 21.3 times more return on investment than 1nvest High. However, Sasol is 21.3 times more volatile than 1nvest High Equity. It trades about 0.34 of its potential returns per unit of risk. 1nvest High Equity is currently generating about -0.12 per unit of risk. If you would invest  350,000  in Sasol Ltd Bee on October 24, 2024 and sell it today you would earn a total of  360,000  from holding Sasol Ltd Bee or generate 102.86% return on investment over 90 days.

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

Sasol Ltd Bee  vs.  1nvest High Equity

Sasol Ltd Bee

Risk-Adjusted Performance

0 of 100

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 strong fundamental drivers, Sasol is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

1nvest High Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1nvest High Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, 1nvest High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sasol and 1nvest High

The main advantage of trading using opposite Sasol and 1nvest High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sasol position performs unexpectedly, 1nvest High 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 1nvest High will offset losses from the drop in 1nvest High's long position.

The idea behind Sasol Ltd Bee and 1nvest High Equity 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.