Correlation Between Impala Platinum and Indexco Limited

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

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

Diversification Opportunities for Impala Platinum and Indexco Limited

0.36

Correlation Coefficient

Impala Platinum  Indexco Limited

Weak diversification

The 3 months correlation between Impala and Indexco is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Impala Platinum Holdings and Indexco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indexco Limited and Impala 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 Impala Platinum Holdings are associated (or correlated) with Indexco Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indexco Limited has no effect on the direction of Impala Platinum i.e., Impala Platinum and Indexco Limited go up and down completely randomly.

Pair Corralation between Impala Platinum and Indexco Limited

Assuming the 90 days trading horizon Impala Platinum Holdings is expected to under-perform the Indexco Limited. In addition to that, Impala Platinum is 4.78 times more volatile than Indexco Limited . It trades about -0.19 of its total potential returns per unit of risk. Indexco Limited is currently generating about -0.14 per unit of volatility. If you would invest  439,500  in Indexco Limited on September 24, 2024 and sell it today you would lose (15,700) from holding Indexco Limited or give up 3.57% of portfolio value over 90 days.

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

Impala Platinum Holdings  vs.  Indexco Limited

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.

Indexco Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indexco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Indexco Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Impala Platinum and Indexco Limited

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

The idea behind Impala Platinum Holdings and Indexco 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.