Correlation Between Sasol and HomeChoice Investments
Can any of the company-specific risk be diversified away by investing in both Sasol and HomeChoice Investments 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 HomeChoice Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sasol and HomeChoice Investments, you can compare the effects of market volatilities on Sasol and HomeChoice Investments 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 HomeChoice Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sasol and HomeChoice Investments.
Diversification Opportunities for Sasol and HomeChoice Investments
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sasol and HomeChoice is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sasol and HomeChoice Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeChoice Investments 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 HomeChoice Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeChoice Investments has no effect on the direction of Sasol i.e., Sasol and HomeChoice Investments go up and down completely randomly.
Pair Corralation between Sasol and HomeChoice Investments
Assuming the 90 days trading horizon Sasol is expected to generate 1.29 times more return on investment than HomeChoice Investments. However, Sasol is 1.29 times more volatile than HomeChoice Investments. It trades about 0.03 of its potential returns per unit of risk. HomeChoice Investments is currently generating about -0.12 per unit of risk. If you would invest 848,000 in Sasol on November 29, 2024 and sell it today you would earn a total of 9,800 from holding Sasol or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sasol vs. HomeChoice Investments
Performance |
| Timeline |
| Sasol |
| HomeChoice Investments |
Sasol and HomeChoice Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sasol and HomeChoice Investments
The main advantage of trading using opposite Sasol and HomeChoice Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sasol position performs unexpectedly, HomeChoice Investments 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 HomeChoice Investments will offset losses from the drop in HomeChoice Investments' long position.| Sasol vs. Astoria Investments | Sasol vs. Reinet Investments SCA | Sasol vs. HomeChoice Investments | Sasol vs. Frontier Transport Holdings |
| HomeChoice Investments vs. MC Mining | HomeChoice Investments vs. Afine Investments | HomeChoice Investments vs. Astral Foods | HomeChoice Investments vs. Life Healthcare |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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