Correlation Between Blue Label and Sasol
Can any of the company-specific risk be diversified away by investing in both Blue Label 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 Blue Label and Sasol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Label Telecoms and Sasol, you can compare the effects of market volatilities on Blue Label 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 Blue Label with a short position of Sasol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Label and Sasol.
Diversification Opportunities for Blue Label and Sasol
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Blue and Sasol is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Sasol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol and Blue Label 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 Blue Label Telecoms 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 Blue Label i.e., Blue Label and Sasol go up and down completely randomly.
Pair Corralation between Blue Label and Sasol
Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 1.0 times more return on investment than Sasol. However, Blue Label Telecoms is 1.0 times less risky than Sasol. It trades about 0.02 of its potential returns per unit of risk. Sasol is currently generating about -0.07 per unit of risk. If you would invest 47,800 in Blue Label Telecoms on August 28, 2024 and sell it today you would earn a total of 4,000 from holding Blue Label Telecoms or generate 8.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Label Telecoms vs. Sasol
Performance |
| Timeline |
| Blue Label Telecoms |
| Sasol |
Blue Label and Sasol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Label and Sasol
The main advantage of trading using opposite Blue Label and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Label 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.| Blue Label vs. Harmony Gold Mining | Blue Label vs. Capitec Bank Holdings | Blue Label vs. Safari Investments RSA | Blue Label vs. Reinet Investments SCA |
| Sasol vs. City Lodge Hotels | Sasol vs. HomeChoice Investments | Sasol vs. Harmony Gold Mining | Sasol vs. Frontier Transport Holdings |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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