Correlation Between Sasol and FNB ETN

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

Diversification Opportunities for Sasol and FNB ETN

-0.07

Correlation Coefficient

Sasol  FNB ETN

Good diversification

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

Pair Corralation between Sasol and FNB ETN

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to generate 23.5 times more return on investment than FNB ETN. However, Sasol is 23.5 times more volatile than FNB ETN BERKSHQ. It trades about 0.05 of its potential returns per unit of risk. FNB ETN BERKSHQ is currently generating about -0.15 per unit of risk. If you would invest  800,000  in Sasol Ltd Bee on October 10, 2024 and sell it today you would lose (150,000) from holding Sasol Ltd Bee or give up 18.75% of portfolio value over 90 days.

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

Sasol Ltd Bee  vs.  FNB ETN BERKSHQ

Sasol Ltd Bee

Risk-Adjusted Performance

0 of 100

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 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.

FNB ETN BERKSHQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FNB ETN BERKSHQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FNB ETN 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 FNB ETN

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

The idea behind Sasol Ltd Bee and FNB ETN BERKSHQ 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.