Correlation Between South Pacific and Wheaton Precious

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

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

Diversification Opportunities for South Pacific and Wheaton Precious

0.23

Correlation Coefficient

South Pacific  Wheaton Precious

Modest diversification

The 3 months correlation between South and Wheaton is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding South Pacific Metals 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 South Pacific 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 South Pacific Metals 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 South Pacific i.e., South Pacific and Wheaton Precious go up and down completely randomly.

Pair Corralation between South Pacific and Wheaton Precious

Assuming the 90 days trading horizon South Pacific Metals is expected to generate 5.61 times more return on investment than Wheaton Precious. However, South Pacific is 5.61 times more volatile than Wheaton Precious Metals. It trades about 0.03 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.05 per unit of risk. If you would invest  90.00  in South Pacific Metals on September 29, 2024 and sell it today you would lose (45.00) from holding South Pacific Metals or give up 50.0% of portfolio value over 90 days.

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

South Pacific Metals  vs.  Wheaton Precious Metals

South Pacific Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South Pacific Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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. In spite of very healthy primary indicators, Wheaton Precious is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with South Pacific and Wheaton Precious

The main advantage of trading using opposite South Pacific and Wheaton Precious positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Pacific 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 South Pacific Metals 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.