Correlation Between Compania and Impala Platinum

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

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

Diversification Opportunities for Compania and Impala Platinum

-0.14

Correlation Coefficient

Compania  Impala Platinum

Good diversification

The 3 months correlation between Compania and Impala is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas 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 Compania 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 Compania de Minas 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 Compania i.e., Compania and Impala Platinum go up and down completely randomly.

Pair Corralation between Compania and Impala Platinum

Considering the 90-day investment horizon Compania de Minas is expected to generate 0.83 times more return on investment than Impala Platinum. However, Compania de Minas is 1.2 times less risky than Impala Platinum. It trades about 0.11 of its potential returns per unit of risk. Impala Platinum Holdings is currently generating about -0.26 per unit of risk. If you would invest  1,206  in Compania de Minas on September 23, 2024 and sell it today you would earn a total of  63.00  from holding Compania de Minas or generate 5.22% return on investment over 90 days.

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

Compania de Minas  vs.  Impala Platinum Holdings

Compania de Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Compania is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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. Despite nearly stable basic indicators, Impala Platinum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Compania and Impala Platinum

The main advantage of trading using opposite Compania and Impala Platinum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania 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 Compania de Minas 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.