Correlation Between Impala Platinum and Fresnillo PLC

Can any of the company-specific risk be diversified away by investing in both Impala Platinum and Fresnillo PLC 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 Fresnillo PLC 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 Fresnillo PLC, you can compare the effects of market volatilities on Impala Platinum and Fresnillo PLC 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 Fresnillo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impala Platinum and Fresnillo PLC.

Diversification Opportunities for Impala Platinum and Fresnillo PLC

0.62

Correlation Coefficient

Impala Platinum  Fresnillo PLC

Poor diversification

The 3 months correlation between Impala and Fresnillo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Impala Platinum Holdings and Fresnillo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresnillo PLC 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 Fresnillo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresnillo PLC has no effect on the direction of Impala Platinum i.e., Impala Platinum and Fresnillo PLC go up and down completely randomly.

Pair Corralation between Impala Platinum and Fresnillo PLC

Assuming the 90 days horizon Impala Platinum Holdings is expected to under-perform the Fresnillo PLC. In addition to that, Impala Platinum is 1.3 times more volatile than Fresnillo PLC. It trades about -0.25 of its total potential returns per unit of risk. Fresnillo PLC is currently generating about -0.08 per unit of volatility. If you would invest  836.00  in Fresnillo PLC on September 22, 2024 and sell it today you would lose (38.00) from holding Fresnillo PLC or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Impala Platinum Holdings  vs.  Fresnillo PLC

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.

Fresnillo PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fresnillo PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fresnillo PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Impala Platinum and Fresnillo PLC

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

The idea behind Impala Platinum Holdings and Fresnillo PLC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.