Correlation Between Wheaton Precious and Overstock

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

Diversification Opportunities for Wheaton Precious and Overstock

0.56

Correlation Coefficient

Wheaton Precious  Overstock

Very weak diversification

The 3 months correlation between Wheaton and Overstock is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Overstock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstock 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 Overstock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstock has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Overstock go up and down completely randomly.

Pair Corralation between Wheaton Precious and Overstock

Assuming the 90 days trading horizon Wheaton Precious is expected to generate 9.14 times less return on investment than Overstock. But when comparing it to its historical volatility, Wheaton Precious Metals is 4.61 times less risky than Overstock. It trades about 0.15 of its potential returns per unit of risk. Overstock is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  479.00  in Overstock on October 26, 2024 and sell it today you would earn a total of  239.00  from holding Overstock or generate 49.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Wheaton Precious Metals  vs.  Overstock

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 latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Overstock

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Wheaton Precious and Overstock

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

The idea behind Wheaton Precious Metals and Overstock 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 Transaction History module to view history of all your transactions and understand their impact on performance.