Correlation Between Repsol SA and Sasol

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

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

Diversification Opportunities for Repsol SA and Sasol

0.82

Correlation Coefficient

Repsol SA  Sasol

Very poor diversification

The 3 months correlation between Repsol and Sasol is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Repsol SA and Sasol Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol Limited and Repsol SA 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 Repsol SA 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 Limited has no effect on the direction of Repsol SA i.e., Repsol SA and Sasol go up and down completely randomly.

Pair Corralation between Repsol SA and Sasol

Assuming the 90 days horizon Repsol SA is expected to generate 2.69 times less return on investment than Sasol. But when comparing it to its historical volatility, Repsol SA is 1.38 times less risky than Sasol. It trades about 0.1 of its potential returns per unit of risk. Sasol Limited is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  371.00  in Sasol Limited on May 20, 2025 and sell it today you would earn a total of  189.00  from holding Sasol Limited or generate 50.94% return on investment over 90 days.

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

Repsol SA  vs.  Sasol Limited

Repsol SA

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Repsol SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Repsol SA reported solid returns over the last few months and may actually be approaching a breakup point.

Sasol Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sasol Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Sasol reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Repsol SA and Sasol

The main advantage of trading using opposite Repsol SA and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repsol SA 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 Repsol SA and Sasol Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.