Correlation Between Starco Brands and Sasol

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

By analyzing existing cross correlation between Starco Brands and Sasol, you can compare the effects of market volatilities on Starco Brands and Sasol 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 Starco Brands with a short position of Sasol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starco Brands and Sasol.

Diversification Opportunities for Starco Brands and Sasol

0.73

Correlation Coefficient

Starco Brands  Sasol

Poor diversification

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

Pair Corralation between Starco Brands and Sasol

Given the investment horizon of 90 days Starco Brands is expected to generate 2.61 times more return on investment than Sasol. However, Starco Brands is 2.61 times more volatile than Sasol. It trades about 0.0 of its potential returns per unit of risk. Sasol is currently generating about -0.06 per unit of risk. If you would invest  17.00  in Starco Brands on September 12, 2024 and sell it today you would lose (9.60) from holding Starco Brands or give up 56.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Starco Brands  vs.  Sasol

Starco Brands

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Starco Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Starco Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Sasol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sasol has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Starco Brands and Sasol

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

The idea behind Starco Brands and Sasol 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.