Correlation Between Sasol and Endocan Corp

Can any of the company-specific risk be diversified away by investing in both Sasol and Endocan 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 Endocan Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sasol and Endocan Corp, you can compare the effects of market volatilities on Sasol and Endocan 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 Endocan Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sasol and Endocan Corp.

Diversification Opportunities for Sasol and Endocan Corp

0.34

Correlation Coefficient

Sasol  Endocan Corp

Weak diversification

The 3 months correlation between Sasol and Endocan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sasol and Endocan Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endocan 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 are associated (or correlated) with Endocan Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endocan Corp has no effect on the direction of Sasol i.e., Sasol and Endocan Corp go up and down completely randomly.

Pair Corralation between Sasol and Endocan Corp

Considering the 90-day investment horizon Sasol is expected to under-perform the Endocan Corp. But the stock apears to be less risky and, when comparing its historical volatility, Sasol is 34.73 times less risky than Endocan Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Endocan Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Endocan Corp on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Endocan Corp or generate 0.0% return on investment over 90 days.

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

Sasol  vs.  Endocan Corp

Sasol

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sasol has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sasol is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Endocan Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Endocan Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Endocan Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sasol and Endocan Corp

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

The idea behind Sasol and Endocan Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.