Correlation Between Sasol and SPAR

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

Diversification Opportunities for Sasol and SPAR

-0.73

Correlation Coefficient

Sasol  SPAR

Pay attention - limited upside

The 3 months correlation between Sasol and SPAR is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and SPAR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPAR Group 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 SPAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPAR Group has no effect on the direction of Sasol i.e., Sasol and SPAR go up and down completely randomly.

Pair Corralation between Sasol and SPAR

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to under-perform the SPAR. In addition to that, Sasol is 3.03 times more volatile than SPAR Group. It trades about -0.02 of its total potential returns per unit of risk. SPAR Group is currently generating about 0.07 per unit of volatility. If you would invest  1,131,900  in SPAR Group on October 9, 2024 and sell it today you would earn a total of  339,600  from holding SPAR Group or generate 30.0% 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.  SPAR Group

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 latest unsteady performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

SPAR Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPAR Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, SPAR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sasol and SPAR

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

The idea behind Sasol Ltd Bee and SPAR Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.