Correlation Between Gemfields and Impala Platinum

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

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

Diversification Opportunities for Gemfields and Impala Platinum

0.27

Correlation Coefficient

Gemfields  Impala Platinum

Modest diversification

The 3 months correlation between Gemfields and Impala is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Gemfields Group 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 Gemfields 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 Gemfields Group 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 Gemfields i.e., Gemfields and Impala Platinum go up and down completely randomly.

Pair Corralation between Gemfields and Impala Platinum

Assuming the 90 days trading horizon Gemfields Group is expected to under-perform the Impala Platinum. In addition to that, Gemfields is 2.97 times more volatile than Impala Platinum Holdings. It trades about -0.15 of its total potential returns per unit of risk. Impala Platinum Holdings is currently generating about -0.18 per unit of volatility. If you would invest  1,012,700  in Impala Platinum Holdings on September 24, 2024 and sell it today you would lose (80,000) from holding Impala Platinum Holdings or give up 7.9% of portfolio value over 90 days.

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

Gemfields Group  vs.  Impala Platinum Holdings

Gemfields Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gemfields Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Gemfields and Impala Platinum

The main advantage of trading using opposite Gemfields and Impala Platinum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gemfields 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 Gemfields Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.