Correlation Between Brimstone Investment and Sasol

Can any of the company-specific risk be diversified away by investing in both Brimstone Investment 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 Brimstone Investment and Sasol into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brimstone Investment and Sasol, you can compare the effects of market volatilities on Brimstone Investment 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 Brimstone Investment with a short position of Sasol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brimstone Investment and Sasol.

Diversification Opportunities for Brimstone Investment and Sasol

0.42

Correlation Coefficient

Brimstone Investment  Sasol

Very weak diversification

The 3 months correlation between Brimstone and Sasol is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Brimstone Investment and Sasol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol and Brimstone Investment 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 Brimstone Investment 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 Brimstone Investment i.e., Brimstone Investment and Sasol go up and down completely randomly.

Pair Corralation between Brimstone Investment and Sasol

Assuming the 90 days trading horizon Brimstone Investment is expected to generate 1.69 times more return on investment than Sasol. However, Brimstone Investment is 1.69 times more volatile than Sasol. It trades about 0.01 of its potential returns per unit of risk. Sasol is currently generating about -0.19 per unit of risk. If you would invest  55,000  in Brimstone Investment on September 4, 2024 and sell it today you would lose (2,000) from holding Brimstone Investment or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Brimstone Investment  vs.  Sasol

Brimstone Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brimstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Brimstone Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sasol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sasol has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Brimstone Investment and Sasol

The main advantage of trading using opposite Brimstone Investment and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brimstone Investment 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 Brimstone Investment 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.