Correlation Between Sasol and Adcorp

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

Diversification Opportunities for Sasol and Adcorp

0.21

Correlation Coefficient

Sasol  Adcorp

Modest diversification

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

Pair Corralation between Sasol and Adcorp

Assuming the 90 days trading horizon Sasol is expected to generate 4.12 times less return on investment than Adcorp. In addition to that, Sasol is 1.16 times more volatile than Adcorp. It trades about 0.0 of its total potential returns per unit of risk. Adcorp is currently generating about 0.02 per unit of volatility. If you would invest  52,855  in Adcorp on October 23, 2024 and sell it today you would lose (6,555) from holding Adcorp or give up 12.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Sasol Ltd Bee  vs.  Adcorp

Sasol Ltd Bee

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sasol Ltd Bee are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Sasol sustained solid returns over the last few months and may actually be approaching a breakup point.

Adcorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adcorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adcorp 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 Adcorp

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

The idea behind Sasol Ltd Bee and Adcorp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.