Correlation Between Sasol and Italtile

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

Diversification Opportunities for Sasol and Italtile

-0.58

Correlation Coefficient

Sasol  Italtile

Excellent diversification

The 3 months correlation between Sasol and Italtile is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Italtile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Italtile 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 Italtile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Italtile has no effect on the direction of Sasol i.e., Sasol and Italtile go up and down completely randomly.

Pair Corralation between Sasol and Italtile

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to under-perform the Italtile. In addition to that, Sasol is 2.85 times more volatile than Italtile. It trades about 0.0 of its total potential returns per unit of risk. Italtile is currently generating about 0.01 per unit of volatility. If you would invest  135,190  in Italtile on October 10, 2024 and sell it today you would earn a total of  2,310  from holding Italtile or generate 1.71% 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.  Italtile

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.

Italtile

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Italtile are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Italtile may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sasol and Italtile

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

The idea behind Sasol Ltd Bee and Italtile 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.