Correlation Between Newmont and Wheaton Precious

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

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

Diversification Opportunities for Newmont and Wheaton Precious

-0.08

Correlation Coefficient

Newmont  Wheaton Precious

Good diversification

The 3 months correlation between Newmont and Wheaton is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Newmont 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 Newmont 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 Newmont 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 Newmont i.e., Newmont and Wheaton Precious go up and down completely randomly.

Pair Corralation between Newmont and Wheaton Precious

Assuming the 90 days horizon Newmont is expected to under-perform the Wheaton Precious. But the stock apears to be less risky and, when comparing its historical volatility, Newmont is 1.09 times less risky than Wheaton Precious. The stock trades about -0.32 of its potential returns per unit of risk. The Wheaton Precious Metals is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  6,006  in Wheaton Precious Metals on September 22, 2024 and sell it today you would lose (466.00) from holding Wheaton Precious Metals or give up 7.76% of portfolio value over 90 days.

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

Newmont  vs.  Wheaton Precious Metals

Newmont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newmont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Wheaton Precious Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Newmont and Wheaton Precious

The main advantage of trading using opposite Newmont and Wheaton Precious positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newmont 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 Newmont 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.