Correlation Between Sasol and Trematon Capital

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

By analyzing existing cross correlation between Sasol Ltd Bee and Trematon Capital Investments, you can compare the effects of market volatilities on Sasol and Trematon Capital 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 Trematon Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sasol and Trematon Capital.

Diversification Opportunities for Sasol and Trematon Capital

0.02

Correlation Coefficient

Sasol  Trematon Capital

Significant diversification

The 3 months correlation between Sasol and Trematon is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sasol Ltd Bee and Trematon Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trematon Capital Inv 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 Ltd Bee are associated (or correlated) with Trematon Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trematon Capital Inv has no effect on the direction of Sasol i.e., Sasol and Trematon Capital go up and down completely randomly.

Pair Corralation between Sasol and Trematon Capital

Assuming the 90 days trading horizon Sasol Ltd Bee is expected to under-perform the Trematon Capital. But the etf apears to be less risky and, when comparing its historical volatility, Sasol Ltd Bee is 2.33 times less risky than Trematon Capital. The etf trades about -0.18 of its potential returns per unit of risk. The Trematon Capital Investments is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  21,800  in Trematon Capital Investments on September 4, 2024 and sell it today you would earn a total of  200.00  from holding Trematon Capital Investments or generate 0.92% return on investment over 90 days.

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

Sasol Ltd Bee  vs.  Trematon Capital Investments

Sasol Ltd Bee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sasol Ltd Bee has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Trematon Capital Inv

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trematon Capital Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Trematon Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sasol and Trematon Capital

The main advantage of trading using opposite Sasol and Trematon Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sasol position performs unexpectedly, Trematon Capital 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 Trematon Capital will offset losses from the drop in Trematon Capital's long position.

The idea behind Sasol Ltd Bee and Trematon Capital Investments 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.