Correlation Between Wheaton Precious and CNH Industrial

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

Diversification Opportunities for Wheaton Precious and CNH Industrial

0.5

Correlation Coefficient

Wheaton Precious  CNH Industrial

Very weak diversification

The 3 months correlation between Wheaton and CNH is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV 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 CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and CNH Industrial go up and down completely randomly.

Pair Corralation between Wheaton Precious and CNH Industrial

Assuming the 90 days trading horizon Wheaton Precious Metals is expected to generate 0.68 times more return on investment than CNH Industrial. However, Wheaton Precious Metals is 1.46 times less risky than CNH Industrial. It trades about 0.21 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.05 per unit of risk. If you would invest  448,500  in Wheaton Precious Metals on December 30, 2024 and sell it today you would earn a total of  147,500  from holding Wheaton Precious Metals or generate 32.89% return on investment over 90 days.

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

Wheaton Precious Metals  vs.  CNH Industrial NV

Wheaton Precious Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Wheaton Precious exhibited solid returns over the last few months and may actually be approaching a breakup point.

CNH Industrial NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wheaton Precious and CNH Industrial

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

The idea behind Wheaton Precious Metals and CNH Industrial NV 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.