Correlation Between Impala Platinum and Platinum Group

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

Diversification Opportunities for Impala Platinum and Platinum Group

0.86

Correlation Coefficient

Impala Platinum  Platinum Group

Very poor diversification

The 3 months correlation between Impala and Platinum is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Impala Platinum Holdings and Platinum Group Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Group 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 Platinum Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Group Metals has no effect on the direction of Impala Platinum i.e., Impala Platinum and Platinum Group go up and down completely randomly.

Pair Corralation between Impala Platinum and Platinum Group

Assuming the 90 days horizon Impala Platinum Holdings is expected to generate 0.78 times more return on investment than Platinum Group. However, Impala Platinum Holdings is 1.29 times less risky than Platinum Group. It trades about 0.15 of its potential returns per unit of risk. Platinum Group Metals is currently generating about 0.1 per unit of risk. If you would invest  427.00  in Impala Platinum Holdings on August 30, 2024 and sell it today you would earn a total of  163.00  from holding Impala Platinum Holdings or generate 38.17% return on investment over 90 days.

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

Impala Platinum Holdings  vs.  Platinum Group Metals

Impala Platinum Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Impala Platinum Holdings are ranked lower than 11 (%) 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.

Platinum Group Metals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Platinum Group Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating essential indicators, Platinum Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impala Platinum and Platinum Group

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

The idea behind Impala Platinum Holdings and Platinum Group Metals 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.