Correlation Between Sibanye Gold and Impala Platinum

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

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

Diversification Opportunities for Sibanye Gold and Impala Platinum

0.85

Correlation Coefficient

Sibanye Gold  Impala Platinum

Very poor diversification

The 3 months correlation between Sibanye and Impala is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sibanye Gold Ltd 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 Sibanye Gold 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 Sibanye Gold Ltd 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 Sibanye Gold i.e., Sibanye Gold and Impala Platinum go up and down completely randomly.

Pair Corralation between Sibanye Gold and Impala Platinum

Given the investment horizon of 90 days Sibanye Gold Ltd is expected to under-perform the Impala Platinum. In addition to that, Sibanye Gold is 1.08 times more volatile than Impala Platinum Holdings. It trades about -0.24 of its total potential returns per unit of risk. Impala Platinum Holdings is currently generating about -0.22 per unit of volatility. If you would invest  706.00  in Impala Platinum Holdings on August 29, 2024 and sell it today you would lose (125.00) from holding Impala Platinum Holdings or give up 17.71% of portfolio value over 90 days.

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

Sibanye Gold Ltd  vs.  Impala Platinum Holdings

Sibanye Gold

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sibanye Gold Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sibanye Gold is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Impala Platinum Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Impala Platinum Holdings are ranked lower than 8 (%) 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.

Pair Trading with Sibanye Gold and Impala Platinum

The main advantage of trading using opposite Sibanye Gold and Impala Platinum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sibanye Gold 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 Sibanye Gold Ltd 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.