Correlation Between Sasol and SLM Corp

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

Diversification Opportunities for Sasol and SLM Corp

-0.44

Correlation Coefficient

Sasol  SLM Corp

Very good diversification

The 3 months correlation between Sasol and SLM is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Sanlam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Sasol i.e., Sasol and SLM Corp go up and down completely randomly.

Pair Corralation between Sasol and SLM Corp

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to generate 6.31 times more return on investment than SLM Corp. However, Sasol is 6.31 times more volatile than Sanlam. It trades about 0.08 of its potential returns per unit of risk. Sanlam is currently generating about 0.01 per unit of risk. If you would invest  420,000  in Sasol Ltd Bee on December 27, 2024 and sell it today you would earn a total of  100,000  from holding Sasol Ltd Bee or generate 23.81% 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.  Sanlam

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.

SLM Corp

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Sasol Ltd Bee and Sanlam 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.