Correlation Between Sasol and Discovery Holdings

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

Diversification Opportunities for Sasol and Discovery Holdings

-0.88

Correlation Coefficient

Sasol  Discovery Holdings

Pay attention - limited upside

The 3 months correlation between Sasol and Discovery is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Discovery Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discovery Holdings 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 Discovery Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discovery Holdings has no effect on the direction of Sasol i.e., Sasol and Discovery Holdings go up and down completely randomly.

Pair Corralation between Sasol and Discovery Holdings

If you would invest  1,948,500  in Discovery Holdings on September 24, 2024 and sell it today you would earn a total of  9,800  from holding Discovery Holdings or generate 0.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Sasol Ltd Bee  vs.  Discovery Holdings

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 weak 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.

Discovery Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Holdings are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Discovery Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sasol and Discovery Holdings

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

The idea behind Sasol Ltd Bee and Discovery Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.