Correlation Between Wheaton Precious and Gold Road

Can any of the company-specific risk be diversified away by investing in both Wheaton Precious and Gold Road 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 Gold Road 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 Gold Road Resources, you can compare the effects of market volatilities on Wheaton Precious and Gold Road 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 Gold Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wheaton Precious and Gold Road.

Diversification Opportunities for Wheaton Precious and Gold Road

0.4

Correlation Coefficient

Wheaton Precious  Gold Road

Very weak diversification

The 3 months correlation between Wheaton and Gold is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Gold Road Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Road Resources 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 Gold Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Road Resources has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Gold Road go up and down completely randomly.

Pair Corralation between Wheaton Precious and Gold Road

Assuming the 90 days horizon Wheaton Precious Metals is expected to under-perform the Gold Road. In addition to that, Wheaton Precious is 1.19 times more volatile than Gold Road Resources. It trades about -0.24 of its total potential returns per unit of risk. Gold Road Resources is currently generating about -0.12 per unit of volatility. If you would invest  129.00  in Gold Road Resources on October 8, 2024 and sell it today you would lose (4.00) from holding Gold Road Resources or give up 3.1% of portfolio value over 90 days.

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

Wheaton Precious Metals  vs.  Gold Road Resources

Wheaton Precious Metals

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Wheaton Precious is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Gold Road Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wheaton Precious and Gold Road

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

The idea behind Wheaton Precious Metals and Gold Road Resources 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.