Correlation Between Impala Platinum and P2 Gold

Can any of the company-specific risk be diversified away by investing in both Impala Platinum and P2 Gold 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 P2 Gold 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 P2 Gold, you can compare the effects of market volatilities on Impala Platinum and P2 Gold 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 P2 Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impala Platinum and P2 Gold.

Diversification Opportunities for Impala Platinum and P2 Gold

0.43

Correlation Coefficient

Impala Platinum  P2 Gold

Very weak diversification

The 3 months correlation between Impala and PGLDF is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Impala Platinum Holdings and P2 Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on P2 Gold 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 P2 Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of P2 Gold has no effect on the direction of Impala Platinum i.e., Impala Platinum and P2 Gold go up and down completely randomly.

Pair Corralation between Impala Platinum and P2 Gold

Assuming the 90 days horizon Impala Platinum Holdings is expected to generate 0.41 times more return on investment than P2 Gold. However, Impala Platinum Holdings is 2.43 times less risky than P2 Gold. It trades about 0.17 of its potential returns per unit of risk. P2 Gold is currently generating about 0.06 per unit of risk. If you would invest  516.00  in Impala Platinum Holdings on December 29, 2024 and sell it today you would earn a total of  194.00  from holding Impala Platinum Holdings or generate 37.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Impala Platinum Holdings  vs.  P2 Gold

Impala Platinum Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Impala Platinum Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Impala Platinum reported solid returns over the last few months and may actually be approaching a breakup point.

P2 Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in P2 Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, P2 Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impala Platinum and P2 Gold

The main advantage of trading using opposite Impala Platinum and P2 Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Impala Platinum position performs unexpectedly, P2 Gold 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 P2 Gold will offset losses from the drop in P2 Gold's long position.

The idea behind Impala Platinum Holdings and P2 Gold 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.