Correlation Between British Amer and Impala Platinum

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

By analyzing existing cross correlation between British American Tobacco and Impala Platinum Holdings, you can compare the effects of market volatilities on British Amer and Impala Platinum 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 British Amer with a short position of Impala Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Impala Platinum.

Diversification Opportunities for British Amer and Impala Platinum

-0.8

Correlation Coefficient

British Amer  Impala Platinum

Pay attention - limited upside

The 3 months correlation between British and Impala is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Impala Platinum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impala Platinum Holdings and British Amer 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 British American Tobacco are associated (or correlated) with Impala Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impala Platinum Holdings has no effect on the direction of British Amer i.e., British Amer and Impala Platinum go up and down completely randomly.

Pair Corralation between British Amer and Impala Platinum

Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.29 times more return on investment than Impala Platinum. However, British American Tobacco is 3.42 times less risky than Impala Platinum. It trades about 0.2 of its potential returns per unit of risk. Impala Platinum Holdings is currently generating about -0.03 per unit of risk. If you would invest  6,046,913  in British American Tobacco on October 23, 2024 and sell it today you would earn a total of  695,987  from holding British American Tobacco or generate 11.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

British American Tobacco  vs.  Impala Platinum Holdings

British American Tobacco

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, British Amer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Impala Platinum Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impala Platinum Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with British Amer and Impala Platinum

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

The idea behind British American Tobacco and Impala Platinum Holdings 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.