Correlation Between Wheaton Precious and Renesas Electronics

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

Diversification Opportunities for Wheaton Precious and Renesas Electronics

0.82

Correlation Coefficient

Wheaton Precious  Renesas Electronics

Very poor diversification

The 3 months correlation between Wheaton and Renesas is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Renesas Electronics go up and down completely randomly.

Pair Corralation between Wheaton Precious and Renesas Electronics

Assuming the 90 days horizon Wheaton Precious Metals is expected to generate 0.59 times more return on investment than Renesas Electronics. However, Wheaton Precious Metals is 1.71 times less risky than Renesas Electronics. It trades about 0.06 of its potential returns per unit of risk. Renesas Electronics is currently generating about 0.03 per unit of risk. If you would invest  3,921  in Wheaton Precious Metals on December 2, 2024 and sell it today you would earn a total of  2,595  from holding Wheaton Precious Metals or generate 66.18% return on investment over 90 days.

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

Wheaton Precious Metals  vs.  Renesas Electronics

Wheaton Precious Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Wheaton Precious may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Renesas Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Renesas Electronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Renesas Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wheaton Precious and Renesas Electronics

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

The idea behind Wheaton Precious Metals and Renesas Electronics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.