Correlation Between Zimplats Holdings and Austral Gold

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

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

Diversification Opportunities for Zimplats Holdings and Austral Gold

0.25

Correlation Coefficient

Zimplats Holdings  Austral Gold

Modest diversification

The 3 months correlation between Zimplats and Austral is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Zimplats Holdings Limited and Austral Gold Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austral Gold Limited and Zimplats Holdings 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 Zimplats Holdings Limited are associated (or correlated) with Austral Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austral Gold Limited has no effect on the direction of Zimplats Holdings i.e., Zimplats Holdings and Austral Gold go up and down completely randomly.

Pair Corralation between Zimplats Holdings and Austral Gold

If you would invest  2.06  in Austral Gold Limited on September 26, 2024 and sell it today you would lose (0.10) from holding Austral Gold Limited or give up 4.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Zimplats Holdings Limited  vs.  Austral Gold Limited

Zimplats Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zimplats Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Zimplats Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Austral Gold Limited

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Zimplats Holdings and Austral Gold

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

The idea behind Zimplats Holdings Limited and Austral Gold Limited 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.