Correlation Between Sasol and Nitto Denko
Can any of the company-specific risk be diversified away by investing in both Sasol and Nitto Denko 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 Nitto Denko into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sasol and Nitto Denko, you can compare the effects of market volatilities on Sasol and Nitto Denko 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 Nitto Denko. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sasol and Nitto Denko.
Diversification Opportunities for Sasol and Nitto Denko
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sasol and Nitto is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sasol and Nitto Denko in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitto Denko 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 Nitto Denko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitto Denko has no effect on the direction of Sasol i.e., Sasol and Nitto Denko go up and down completely randomly.
Pair Corralation between Sasol and Nitto Denko
Considering the 90-day investment horizon Sasol is expected to generate 7.59 times less return on investment than Nitto Denko. In addition to that, Sasol is 1.52 times more volatile than Nitto Denko. It trades about 0.02 of its total potential returns per unit of risk. Nitto Denko is currently generating about 0.21 per unit of volatility. If you would invest 1,840 in Nitto Denko on November 28, 2024 and sell it today you would earn a total of 185.00 from holding Nitto Denko or generate 10.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sasol vs. Nitto Denko
Performance |
| Timeline |
| Sasol |
| Nitto Denko |
Sasol and Nitto Denko Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sasol and Nitto Denko
The main advantage of trading using opposite Sasol and Nitto Denko positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sasol position performs unexpectedly, Nitto Denko 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 Nitto Denko will offset losses from the drop in Nitto Denko's long position.The idea behind Sasol and Nitto Denko 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.| Nitto Denko vs. Minerals Technologies | Nitto Denko vs. Hawkins | Nitto Denko vs. NewMarket | Nitto Denko vs. Ecovyst |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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