Correlation Between Sasol and Dis Chem

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

Diversification Opportunities for Sasol and Dis Chem

-0.53

Correlation Coefficient

Sasol  Dis Chem

Excellent diversification

The 3 months correlation between Sasol and Dis is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Dis Chem Pharmacies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dis Chem Pharmacies 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 Dis Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dis Chem Pharmacies has no effect on the direction of Sasol i.e., Sasol and Dis Chem go up and down completely randomly.

Pair Corralation between Sasol and Dis Chem

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to under-perform the Dis Chem. In addition to that, Sasol is 1.39 times more volatile than Dis Chem Pharmacies. It trades about -0.18 of its total potential returns per unit of risk. Dis Chem Pharmacies is currently generating about 0.09 per unit of volatility. If you would invest  353,712  in Dis Chem Pharmacies on September 5, 2024 and sell it today you would earn a total of  24,788  from holding Dis Chem Pharmacies or generate 7.01% return on investment over 90 days.

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

Sasol Ltd Bee  vs.  Dis Chem Pharmacies

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 unsteady performance in the last few months, the Etf's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Dis Chem Pharmacies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dis Chem Pharmacies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Dis Chem may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sasol and Dis Chem

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

The idea behind Sasol Ltd Bee and Dis Chem Pharmacies 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.