Correlation Between Vale SA and Impala Platinum
Can any of the company-specific risk be diversified away by investing in both Vale SA 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 Vale SA and Impala Platinum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Impala Platinum Holdings, you can compare the effects of market volatilities on Vale SA 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 Vale SA with a short position of Impala Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Impala Platinum.
Diversification Opportunities for Vale SA and Impala Platinum
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vale and Impala is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA 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 Vale SA 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 Vale SA 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 Vale SA i.e., Vale SA and Impala Platinum go up and down completely randomly.
Pair Corralation between Vale SA and Impala Platinum
Assuming the 90 days trading horizon Vale SA is expected to under-perform the Impala Platinum. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA is 2.3 times less risky than Impala Platinum. The stock trades about -0.05 of its potential returns per unit of risk. The Impala Platinum Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 392.00 in Impala Platinum Holdings on September 14, 2024 and sell it today you would earn a total of 164.00 from holding Impala Platinum Holdings or generate 41.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Impala Platinum Holdings
Performance |
| Timeline |
| Vale SA |
| Impala Platinum Holdings |
Vale SA and Impala Platinum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Impala Platinum
The main advantage of trading using opposite Vale SA and Impala Platinum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA 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.| Vale SA vs. BHP Group Limited | Vale SA vs. Superior Plus Corp | Vale SA vs. SIVERS SEMICONDUCTORS AB | Vale SA vs. Norsk Hydro ASA |
| Impala Platinum vs. BHP Group Limited | Impala Platinum vs. Vale SA | Impala Platinum vs. Superior Plus Corp | Impala Platinum vs. SIVERS SEMICONDUCTORS AB |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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