Correlation Between Platinum Group and Impala Platinum

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

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

Diversification Opportunities for Platinum Group and Impala Platinum

0.74

Correlation Coefficient

Platinum Group  Impala Platinum

Poor diversification

The 3 months correlation between Platinum and Impala is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Platinum Group Metals 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 Platinum Group 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 Platinum Group Metals 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 Platinum Group i.e., Platinum Group and Impala Platinum go up and down completely randomly.

Pair Corralation between Platinum Group and Impala Platinum

Considering the 90-day investment horizon Platinum Group is expected to generate 5.16 times less return on investment than Impala Platinum. In addition to that, Platinum Group is 1.35 times more volatile than Impala Platinum Holdings. It trades about 0.01 of its total potential returns per unit of risk. Impala Platinum Holdings is currently generating about 0.07 per unit of volatility. If you would invest  450.00  in Impala Platinum Holdings on September 12, 2024 and sell it today you would earn a total of  111.00  from holding Impala Platinum Holdings or generate 24.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Platinum Group Metals  vs.  Impala Platinum Holdings

Platinum Group Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Platinum Group Metals are ranked lower than 4 (%) 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.

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. Despite nearly weak basic indicators, Impala Platinum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Platinum Group and Impala Platinum

The main advantage of trading using opposite Platinum Group and Impala Platinum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Platinum Group 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 Platinum Group Metals 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.