Correlation Between Eastern Platinum and Platinum Group

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

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

Diversification Opportunities for Eastern Platinum and Platinum Group

0.65

Correlation Coefficient

Eastern Platinum  Platinum Group

Poor diversification

The 3 months correlation between Eastern and Platinum is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Platinum Limited and Platinum Group Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Group Metals and Eastern Platinum 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 Eastern Platinum Limited are associated (or correlated) with Platinum Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Group Metals has no effect on the direction of Eastern Platinum i.e., Eastern Platinum and Platinum Group go up and down completely randomly.

Pair Corralation between Eastern Platinum and Platinum Group

Assuming the 90 days trading horizon Eastern Platinum is expected to generate 2.73 times less return on investment than Platinum Group. In addition to that, Eastern Platinum is 1.24 times more volatile than Platinum Group Metals. It trades about 0.04 of its total potential returns per unit of risk. Platinum Group Metals is currently generating about 0.15 per unit of volatility. If you would invest  162.00  in Platinum Group Metals on September 3, 2024 and sell it today you would earn a total of  77.00  from holding Platinum Group Metals or generate 47.53% return on investment over 90 days.

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

Eastern Platinum Limited  vs.  Platinum Group Metals

Eastern Platinum

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Platinum Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Eastern Platinum displayed solid returns over the last few months and may actually be approaching a breakup point.

Platinum Group Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Platinum Group Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Platinum Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern Platinum and Platinum Group

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

The idea behind Eastern Platinum Limited and Platinum Group Metals 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 CEOs Directory module to screen CEOs from public companies around the world.