Correlation Between Sasol and Blue Label

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

Diversification Opportunities for Sasol and Blue Label

-0.21

Correlation Coefficient

Sasol  Blue Label

Very good diversification

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

Pair Corralation between Sasol and Blue Label

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to generate 7.44 times more return on investment than Blue Label. However, Sasol is 7.44 times more volatile than Blue Label Telecoms. It trades about 0.01 of its potential returns per unit of risk. Blue Label Telecoms is currently generating about 0.03 per unit of risk. If you would invest  1,020,000  in Sasol Ltd Bee on October 24, 2024 and sell it today you would lose (310,000) from holding Sasol Ltd Bee or give up 30.39% 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.  Blue Label Telecoms

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.

Blue Label Telecoms

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Label Telecoms are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Blue Label 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 Blue Label

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

The idea behind Sasol Ltd Bee and Blue Label Telecoms 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.