Correlation Between Sasol and Bid

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

Diversification Opportunities for Sasol and Bid

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between Sasol and Bid is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Bid Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bid Corporation 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 Bid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bid Corporation has no effect on the direction of Sasol i.e., Sasol and Bid go up and down completely randomly.

Pair Corralation between Sasol and Bid

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to under-perform the Bid. In addition to that, Sasol is 4.17 times more volatile than Bid Corporation. It trades about -0.02 of its total potential returns per unit of risk. Bid Corporation is currently generating about 0.0 per unit of volatility. If you would invest  4,376,831  in Bid Corporation on October 9, 2024 and sell it today you would lose (31,531) from holding Bid Corporation or give up 0.72% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sasol Ltd Bee  vs.  Bid Corp.

 Performance 
       Timeline  
Sasol Ltd Bee 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Bid Corporation 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bid Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bid is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sasol and Bid Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sasol and Bid

The main advantage of trading using opposite Sasol and Bid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sasol position performs unexpectedly, Bid 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 Bid will offset losses from the drop in Bid's long position.
The idea behind Sasol Ltd Bee and Bid Corporation 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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