Correlation Between Sasol and Prosus NV

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

Diversification Opportunities for Sasol and Prosus NV

-0.71

Correlation Coefficient

Sasol  Prosus NV

Pay attention - limited upside

The 3 months correlation between Sasol and Prosus is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV 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 Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV has no effect on the direction of Sasol i.e., Sasol and Prosus NV go up and down completely randomly.

Pair Corralation between Sasol and Prosus NV

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to generate 3.27 times more return on investment than Prosus NV. However, Sasol is 3.27 times more volatile than Prosus NV. It trades about 0.07 of its potential returns per unit of risk. Prosus NV is currently generating about 0.1 per unit of risk. If you would invest  420,000  in Sasol Ltd Bee on December 31, 2024 and sell it today you would earn a total of  85,000  from holding Sasol Ltd Bee or generate 20.24% return on investment over 90 days.

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

Sasol Ltd Bee  vs.  Prosus NV

Sasol Ltd Bee

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sasol Ltd Bee are ranked lower than 5 (%) 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.

Prosus NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Prosus NV exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sasol and Prosus NV

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

The idea behind Sasol Ltd Bee and Prosus NV 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.