Correlation Between RCL Foods and Impala Platinum

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

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

Diversification Opportunities for RCL Foods and Impala Platinum

0.1

Correlation Coefficient

RCL Foods  Impala Platinum

Average diversification

The 3 months correlation between RCL and Impala is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods 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 RCL Foods 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 RCL Foods 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 RCL Foods i.e., RCL Foods and Impala Platinum go up and down completely randomly.

Pair Corralation between RCL Foods and Impala Platinum

Assuming the 90 days trading horizon RCL Foods is expected to generate 17.08 times less return on investment than Impala Platinum. But when comparing it to its historical volatility, RCL Foods is 1.38 times less risky than Impala Platinum. It trades about 0.01 of its potential returns per unit of risk. Impala Platinum Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  933,000  in Impala Platinum Holdings on December 21, 2024 and sell it today you would earn a total of  315,700  from holding Impala Platinum Holdings or generate 33.84% return on investment over 90 days.

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

RCL Foods  vs.  Impala Platinum Holdings

RCL Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days RCL Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, RCL Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Impala Platinum exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RCL Foods and Impala Platinum

The main advantage of trading using opposite RCL Foods and Impala Platinum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods 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 RCL Foods 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..