Correlation Between Impala Platinum and Star Royalties

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

Diversification Opportunities for Impala Platinum and Star Royalties

0.71

Correlation Coefficient

Impala Platinum  Star Royalties

Poor diversification

The 3 months correlation between Impala and Star is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Impala Platinum Holdings and Star Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Royalties 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 Star Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Royalties has no effect on the direction of Impala Platinum i.e., Impala Platinum and Star Royalties go up and down completely randomly.

Pair Corralation between Impala Platinum and Star Royalties

Assuming the 90 days horizon Impala Platinum Holdings is expected to generate 1.09 times more return on investment than Star Royalties. However, Impala Platinum is 1.09 times more volatile than Star Royalties. It trades about 0.13 of its potential returns per unit of risk. Star Royalties is currently generating about 0.08 per unit of risk. If you would invest  440.00  in Impala Platinum Holdings on September 3, 2024 and sell it today you would earn a total of  141.00  from holding Impala Platinum Holdings or generate 32.05% return on investment over 90 days.

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

Impala Platinum Holdings  vs.  Star Royalties

Impala Platinum Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Impala Platinum Holdings are ranked lower than 10 (%) 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.

Star Royalties

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Star Royalties are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Star Royalties reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impala Platinum and Star Royalties

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

The idea behind Impala Platinum Holdings and Star Royalties 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.