Correlation Between Impala Platinum and Silver Grail

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

Diversification Opportunities for Impala Platinum and Silver Grail

-0.68

Correlation Coefficient

Impala Platinum  Silver Grail

Excellent diversification

The 3 months correlation between Impala and Silver is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Impala Platinum Holdings and Silver Grail Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Grail Resources 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 Silver Grail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Grail Resources has no effect on the direction of Impala Platinum i.e., Impala Platinum and Silver Grail go up and down completely randomly.

Pair Corralation between Impala Platinum and Silver Grail

Assuming the 90 days horizon Impala Platinum is expected to generate 3.58 times less return on investment than Silver Grail. But when comparing it to its historical volatility, Impala Platinum Holdings is 5.55 times less risky than Silver Grail. It trades about 0.12 of its potential returns per unit of risk. Silver Grail Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Silver Grail Resources on September 2, 2024 and sell it today you would lose (1.00) from holding Silver Grail Resources or give up 12.5% of portfolio value over 90 days.

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

Impala Platinum Holdings  vs.  Silver Grail Resources

Impala Platinum Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Impala Platinum Holdings are ranked lower than 9 (%) 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.

Silver Grail Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Grail Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Silver Grail reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impala Platinum and Silver Grail

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

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