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

0.9

Correlation Coefficient

Impala Platinum  Fresnillo PLC

Almost no diversification

The 3 months correlation between Impala and Fresnillo is 0.9. 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 is expected to generate 1.2 times less return on investment than Fresnillo PLC. In addition to that, Impala Platinum is 1.34 times more volatile than Fresnillo PLC. It trades about 0.2 of its total potential returns per unit of risk. Fresnillo PLC is currently generating about 0.32 per unit of volatility. If you would invest  781.00  in Fresnillo PLC on December 30, 2024 and sell it today you would earn a total of  457.00  from holding Fresnillo PLC or generate 58.51% return on investment over 90 days.

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

Impala Platinum Holdings  vs.  Fresnillo PLC

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 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Impala Platinum showed solid returns over the last few months and may actually be approaching a breakup point.

Fresnillo PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fresnillo PLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fresnillo PLC reported solid returns over the last few months and may actually be approaching a breakup point.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.