Correlation Between Anglo American and Impala Platinum
Can any of the company-specific risk be diversified away by investing in both Anglo American 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 Anglo American and Impala Platinum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Anglo American Platinum and Impala Platinum Holdings, you can compare the effects of market volatilities on Anglo American 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 Anglo American with a short position of Impala Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Impala Platinum.
Diversification Opportunities for Anglo American and Impala Platinum
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Anglo and Impala is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum 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 Anglo American 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 Anglo American Platinum 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 Anglo American i.e., Anglo American and Impala Platinum go up and down completely randomly.
Pair Corralation between Anglo American and Impala Platinum
Assuming the 90 days trading horizon Anglo American Platinum is expected to under-perform the Impala Platinum. But the stock apears to be less risky and, when comparing its historical volatility, Anglo American Platinum is 1.19 times less risky than Impala Platinum. The stock trades about -0.4 of its potential returns per unit of risk. The Impala Platinum Holdings is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest 1,260,200 in Impala Platinum Holdings on August 28, 2024 and sell it today you would lose (247,500) from holding Impala Platinum Holdings or give up 19.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Anglo American Platinum vs. Impala Platinum Holdings
Performance |
| Timeline |
| Anglo American Platinum |
| Impala Platinum Holdings |
Anglo American and Impala Platinum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Impala Platinum
The main advantage of trading using opposite Anglo American and Impala Platinum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American 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.| Anglo American vs. CA Sales Holdings | Anglo American vs. Life Healthcare | Anglo American vs. Afine Investments | Anglo American vs. E Media Holdings |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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