Correlation Between Satrix MSCI and Sasol

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

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

Diversification Opportunities for Satrix MSCI and Sasol

-0.78

Correlation Coefficient

Satrix MSCI  Sasol

Pay attention - limited upside

The 3 months correlation between Satrix and Sasol is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Satrix MSCI World and Sasol Ltd Bee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol Ltd Bee and Satrix MSCI 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 Satrix MSCI World 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 Ltd Bee has no effect on the direction of Satrix MSCI i.e., Satrix MSCI and Sasol go up and down completely randomly.

Pair Corralation between Satrix MSCI and Sasol

Assuming the 90 days trading horizon Satrix MSCI World is expected to generate 0.49 times more return on investment than Sasol. However, Satrix MSCI World is 2.03 times less risky than Sasol. It trades about 0.15 of its potential returns per unit of risk. Sasol Ltd Bee is currently generating about -0.18 per unit of risk. If you would invest  921,500  in Satrix MSCI World on September 4, 2024 and sell it today you would earn a total of  84,000  from holding Satrix MSCI World or generate 9.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Satrix MSCI World  vs.  Sasol Ltd Bee

Satrix MSCI World

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Satrix MSCI World are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Satrix MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Satrix MSCI and Sasol

The main advantage of trading using opposite Satrix MSCI and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Satrix MSCI 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 Satrix MSCI World and Sasol Ltd Bee 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.