Correlation Between Wheaton Precious and 2G ENERGY

Can any of the company-specific risk be diversified away by investing in both Wheaton Precious and 2G ENERGY 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 Wheaton Precious and 2G ENERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wheaton Precious Metals and 2G ENERGY , you can compare the effects of market volatilities on Wheaton Precious and 2G ENERGY 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 Wheaton Precious with a short position of 2G ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wheaton Precious and 2G ENERGY.

Diversification Opportunities for Wheaton Precious and 2G ENERGY

0.16

Correlation Coefficient

Wheaton Precious  2G ENERGY

Average diversification

The 3 months correlation between Wheaton and 2GB is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and 2G ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2G ENERGY and Wheaton Precious 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 Wheaton Precious Metals are associated (or correlated) with 2G ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2G ENERGY has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and 2G ENERGY go up and down completely randomly.

Pair Corralation between Wheaton Precious and 2G ENERGY

Assuming the 90 days horizon Wheaton Precious Metals is expected to generate 0.47 times more return on investment than 2G ENERGY. However, Wheaton Precious Metals is 2.11 times less risky than 2G ENERGY. It trades about 0.26 of its potential returns per unit of risk. 2G ENERGY is currently generating about 0.05 per unit of risk. If you would invest  5,478  in Wheaton Precious Metals on December 29, 2024 and sell it today you would earn a total of  1,596  from holding Wheaton Precious Metals or generate 29.13% return on investment over 90 days.

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

Wheaton Precious Metals  vs.  2G ENERGY

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 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wheaton Precious reported solid returns over the last few months and may actually be approaching a breakup point.

2G ENERGY

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 2G ENERGY are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, 2G ENERGY may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wheaton Precious and 2G ENERGY

The main advantage of trading using opposite Wheaton Precious and 2G ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wheaton Precious position performs unexpectedly, 2G ENERGY 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 2G ENERGY will offset losses from the drop in 2G ENERGY's long position.

The idea behind Wheaton Precious Metals and 2G ENERGY 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.