Correlation Between Impala Platinum and Fortescue Metals

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

Diversification Opportunities for Impala Platinum and Fortescue Metals

-0.59

Correlation Coefficient

Impala Platinum  Fortescue Metals

Excellent diversification

The 3 months correlation between Impala and Fortescue is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Impala Platinum Holdings and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals 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 Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Impala Platinum i.e., Impala Platinum and Fortescue Metals go up and down completely randomly.

Pair Corralation between Impala Platinum and Fortescue Metals

Assuming the 90 days horizon Impala Platinum Holdings is expected to generate 1.59 times more return on investment than Fortescue Metals. However, Impala Platinum is 1.59 times more volatile than Fortescue Metals Group. It trades about 0.18 of its potential returns per unit of risk. Fortescue Metals Group is currently generating about -0.09 per unit of risk. If you would invest  479.00  in Impala Platinum Holdings on December 27, 2024 and sell it today you would earn a total of  188.00  from holding Impala Platinum Holdings or generate 39.25% return on investment over 90 days.

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

Impala Platinum Holdings  vs.  Fortescue Metals Group

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 14 (%) 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.

Fortescue Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortescue Metals Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Impala Platinum and Fortescue Metals

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

The idea behind Impala Platinum Holdings and Fortescue Metals Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.