Correlation Between Sasol and Old Mutual

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

Diversification Opportunities for Sasol and Old Mutual

0.08

Correlation Coefficient

Sasol  Old Mutual

Significant diversification

The 3 months correlation between Sasol and Old is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Old Mutual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Mutual 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 Old Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Mutual has no effect on the direction of Sasol i.e., Sasol and Old Mutual go up and down completely randomly.

Pair Corralation between Sasol and Old Mutual

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to generate 5.02 times more return on investment than Old Mutual. However, Sasol is 5.02 times more volatile than Old Mutual. It trades about 0.11 of its potential returns per unit of risk. Old Mutual is currently generating about -0.06 per unit of risk. If you would invest  350,000  in Sasol Ltd Bee on December 22, 2024 and sell it today you would earn a total of  175,100  from holding Sasol Ltd Bee or generate 50.03% return on investment over 90 days.

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

Sasol Ltd Bee  vs.  Old Mutual

Sasol Ltd Bee

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sasol Ltd Bee are ranked lower than 9 (%) 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.

Old Mutual

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Sasol Ltd Bee and Old Mutual 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.