Correlation Between Kap Industrial and Impala Platinum

Can any of the company-specific risk be diversified away by investing in both Kap Industrial and Impala Platinum 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 Kap Industrial and Impala Platinum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kap Industrial Holdings and Impala Platinum Holdings, you can compare the effects of market volatilities on Kap Industrial and Impala Platinum 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 Kap Industrial with a short position of Impala Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kap Industrial and Impala Platinum.

Diversification Opportunities for Kap Industrial and Impala Platinum

0.67

Correlation Coefficient

Kap Industrial  Impala Platinum

Poor diversification

The 3 months correlation between Kap and Impala is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Impala Platinum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impala Platinum Holdings and Kap Industrial 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 Kap Industrial Holdings are associated (or correlated) with Impala Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impala Platinum Holdings has no effect on the direction of Kap Industrial i.e., Kap Industrial and Impala Platinum go up and down completely randomly.

Pair Corralation between Kap Industrial and Impala Platinum

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to generate 0.88 times more return on investment than Impala Platinum. However, Kap Industrial Holdings is 1.13 times less risky than Impala Platinum. It trades about -0.32 of its potential returns per unit of risk. Impala Platinum Holdings is currently generating about -0.31 per unit of risk. If you would invest  31,900  in Kap Industrial Holdings on October 8, 2024 and sell it today you would lose (3,300) from holding Kap Industrial Holdings or give up 10.34% of portfolio value over 90 days.

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

Kap Industrial Holdings  vs.  Impala Platinum Holdings

Kap Industrial Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Impala Platinum Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impala Platinum Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Kap Industrial and Impala Platinum

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

The idea behind Kap Industrial Holdings and Impala Platinum Holdings 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.