Correlation Between Sasol and Deneb Investments

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

Diversification Opportunities for Sasol and Deneb Investments

0.6

Correlation Coefficient

Sasol  Deneb Investments

Poor diversification

The 3 months correlation between Sasol and Deneb is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Deneb Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deneb Investments 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 Deneb Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deneb Investments has no effect on the direction of Sasol i.e., Sasol and Deneb Investments go up and down completely randomly.

Pair Corralation between Sasol and Deneb Investments

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to generate 5.26 times more return on investment than Deneb Investments. However, Sasol is 5.26 times more volatile than Deneb Investments. It trades about 0.4 of its potential returns per unit of risk. Deneb Investments is currently generating about 0.19 per unit of risk. If you would invest  350,000  in Sasol Ltd Bee on October 23, 2024 and sell it today you would earn a total of  440,000  from holding Sasol Ltd Bee or generate 125.71% return on investment over 90 days.

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

Sasol Ltd Bee  vs.  Deneb Investments

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.

Deneb Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deneb Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sasol and Deneb Investments

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

The idea behind Sasol Ltd Bee and Deneb Investments 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.