Correlation Between URU Metals and Wheaton Precious

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

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

Diversification Opportunities for URU Metals and Wheaton Precious

0.26

Correlation Coefficient

URU Metals  Wheaton Precious

Modest diversification

The 3 months correlation between URU and Wheaton is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding URU 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 URU Metals 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 URU 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 URU Metals i.e., URU Metals and Wheaton Precious go up and down completely randomly.

Pair Corralation between URU Metals and Wheaton Precious

Assuming the 90 days trading horizon URU Metals is expected to generate 3.29 times more return on investment than Wheaton Precious. However, URU Metals is 3.29 times more volatile than Wheaton Precious Metals. It trades about 0.12 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about -0.23 per unit of risk. If you would invest  13,500  in URU Metals on September 25, 2024 and sell it today you would earn a total of  1,500  from holding URU Metals or generate 11.11% return on investment over 90 days.

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

URU Metals  vs.  Wheaton Precious Metals

URU Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in URU Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, URU Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Wheaton Precious Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Wheaton Precious is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with URU Metals and Wheaton Precious

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

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.