Correlation Between Sasol and Allied Electronics
Can any of the company-specific risk be diversified away by investing in both Sasol and Allied Electronics 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 Allied Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sasol and Allied Electronics, you can compare the effects of market volatilities on Sasol and Allied Electronics 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 Allied Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sasol and Allied Electronics.
Diversification Opportunities for Sasol and Allied Electronics
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sasol and Allied is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sasol and Allied Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Electronics 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 Allied Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Electronics has no effect on the direction of Sasol i.e., Sasol and Allied Electronics go up and down completely randomly.
Pair Corralation between Sasol and Allied Electronics
Assuming the 90 days trading horizon Sasol is expected to under-perform the Allied Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Sasol is 1.01 times less risky than Allied Electronics. The stock trades about -0.08 of its potential returns per unit of risk. The Allied Electronics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 78,900 in Allied Electronics on August 27, 2024 and sell it today you would earn a total of 119,600 from holding Allied Electronics or generate 151.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sasol vs. Allied Electronics
Performance |
| Timeline |
| Sasol |
| Allied Electronics |
Sasol and Allied Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sasol and Allied Electronics
The main advantage of trading using opposite Sasol and Allied Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sasol position performs unexpectedly, Allied Electronics 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 Allied Electronics will offset losses from the drop in Allied Electronics' long position.| Sasol vs. City Lodge Hotels | Sasol vs. HomeChoice Investments | Sasol vs. Harmony Gold Mining | Sasol vs. Frontier Transport Holdings |
| Allied Electronics vs. Ayo Technology Solutions | Allied Electronics vs. Centaur Bci Balanced | Allied Electronics vs. Growthpoint Properties | Allied Electronics vs. Bowler Metcalf |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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