Correlation Between Sasol and Nampak

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

Diversification Opportunities for Sasol and Nampak

0.63

Correlation Coefficient

Sasol  Nampak

Poor diversification

The 3 months correlation between Sasol and Nampak is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Nampak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nampak 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 Nampak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nampak has no effect on the direction of Sasol i.e., Sasol and Nampak go up and down completely randomly.

Pair Corralation between Sasol and Nampak

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to generate 8.62 times more return on investment than Nampak. However, Sasol is 8.62 times more volatile than Nampak. It trades about 0.34 of its potential returns per unit of risk. Nampak is currently generating about 0.14 per unit of risk. If you would invest  350,000  in Sasol Ltd Bee on October 24, 2024 and sell it today you would earn a total of  360,000  from holding Sasol Ltd Bee or generate 102.86% return on investment over 90 days.

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

Sasol Ltd Bee  vs.  Nampak

Sasol Ltd Bee

Risk-Adjusted Performance

0 of 100

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.

Nampak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nampak has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Nampak 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 Nampak

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

The idea behind Sasol Ltd Bee and Nampak 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.