Correlation Between GM and Wheaton Precious

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

By analyzing existing cross correlation between General Motors and Wheaton Precious Metals, you can compare the effects of market volatilities on GM and Wheaton Precious 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 GM with a short position of Wheaton Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Wheaton Precious.

Diversification Opportunities for GM and Wheaton Precious

-0.6

Correlation Coefficient

GM  Wheaton Precious

Excellent diversification

The 3 months correlation between GM and Wheaton is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals and GM 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 General Motors are associated (or correlated) with Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of GM i.e., GM and Wheaton Precious go up and down completely randomly.

Pair Corralation between GM and Wheaton Precious

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Wheaton Precious. In addition to that, GM is 1.54 times more volatile than Wheaton Precious Metals. It trades about -0.03 of its total potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.27 per unit of volatility. If you would invest  8,227  in Wheaton Precious Metals on December 27, 2024 and sell it today you would earn a total of  2,524  from holding Wheaton Precious Metals or generate 30.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

General Motors  vs.  Wheaton Precious Metals

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Wheaton Precious Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Wheaton Precious displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Wheaton Precious

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

The idea behind General Motors and Wheaton Precious Metals 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.