Correlation Between Sasol and Tiger Brands

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

Diversification Opportunities for Sasol and Tiger Brands

-0.76

Correlation Coefficient

Sasol  Tiger Brands

Pay attention - limited upside

The 3 months correlation between Sasol and Tiger is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Tiger Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiger Brands 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 Tiger Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiger Brands has no effect on the direction of Sasol i.e., Sasol and Tiger Brands go up and down completely randomly.

Pair Corralation between Sasol and Tiger Brands

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to generate 12.24 times more return on investment than Tiger Brands. However, Sasol is 12.24 times more volatile than Tiger Brands. It trades about 0.34 of its potential returns per unit of risk. Tiger Brands is currently generating about -0.22 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 Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Sasol Ltd Bee  vs.  Tiger Brands

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 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.

Tiger Brands

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tiger Brands are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Tiger Brands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sasol and Tiger Brands

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

The idea behind Sasol Ltd Bee and Tiger Brands 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.