Correlation Between H B and Sasol
Can any of the company-specific risk be diversified away by investing in both H B 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 H B and Sasol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between H B Fuller and Sasol, you can compare the effects of market volatilities on H B 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 H B with a short position of Sasol. Check out your portfolio center. Please also check ongoing floating volatility patterns of H B and Sasol.
Diversification Opportunities for H B and Sasol
Very poor diversification
The 3 months correlation between FUL and Sasol is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding H B Fuller and Sasol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol and H B 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 H B Fuller 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 H B i.e., H B and Sasol go up and down completely randomly.
Pair Corralation between H B and Sasol
Considering the 90-day investment horizon H B Fuller is expected to generate 0.58 times more return on investment than Sasol. However, H B Fuller is 1.71 times less risky than Sasol. It trades about 0.04 of its potential returns per unit of risk. Sasol is currently generating about -0.13 per unit of risk. If you would invest 7,534 in H B Fuller on August 27, 2024 and sell it today you would earn a total of 82.00 from holding H B Fuller or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
H B Fuller vs. Sasol
Performance |
| Timeline |
| H B Fuller |
| Sasol |
H B and Sasol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with H B and Sasol
The main advantage of trading using opposite H B and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H B 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 H B Fuller 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.| Sasol vs. Olin Corporation | Sasol vs. Cabot | Sasol vs. Kronos Worldwide | Sasol vs. LyondellBasell Industries NV |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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