Correlation Between Satrix 40 and Sasol

Can any of the company-specific risk be diversified away by investing in both Satrix 40 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 Satrix 40 and Sasol into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Satrix 40 ETF and Sasol Ltd Bee, you can compare the effects of market volatilities on Satrix 40 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 Satrix 40 with a short position of Sasol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Satrix 40 and Sasol.

Diversification Opportunities for Satrix 40 and Sasol

0.61

Correlation Coefficient

Satrix 40  Sasol

Poor diversification

The 3 months correlation between Satrix and Sasol is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Satrix 40 ETF and Sasol Ltd Bee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol Ltd Bee and Satrix 40 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 Satrix 40 ETF 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 Ltd Bee has no effect on the direction of Satrix 40 i.e., Satrix 40 and Sasol go up and down completely randomly.

Pair Corralation between Satrix 40 and Sasol

Assuming the 90 days trading horizon Satrix 40 ETF is expected to generate 0.07 times more return on investment than Sasol. However, Satrix 40 ETF is 15.2 times less risky than Sasol. It trades about -0.08 of its potential returns per unit of risk. Sasol Ltd Bee is currently generating about -0.01 per unit of risk. If you would invest  785,806  in Satrix 40 ETF on October 12, 2024 and sell it today you would lose (27,906) from holding Satrix 40 ETF or give up 3.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Satrix 40 ETF  vs.  Sasol Ltd Bee

Satrix 40 ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Satrix 40 ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Satrix 40 is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

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.

Pair Trading with Satrix 40 and Sasol

The main advantage of trading using opposite Satrix 40 and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Satrix 40 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 Satrix 40 ETF and Sasol Ltd Bee 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.