Correlation Between Wheaton Precious and Litigation Capital

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

Diversification Opportunities for Wheaton Precious and Litigation Capital

0.37

Correlation Coefficient

Wheaton Precious  Litigation Capital

Weak diversification

The 3 months correlation between Wheaton and Litigation is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Litigation Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litigation Capital 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 Litigation Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litigation Capital has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Litigation Capital go up and down completely randomly.

Pair Corralation between Wheaton Precious and Litigation Capital

Assuming the 90 days trading horizon Wheaton Precious is expected to generate 1.21 times less return on investment than Litigation Capital. But when comparing it to its historical volatility, Wheaton Precious Metals is 1.1 times less risky than Litigation Capital. It trades about 0.05 of its potential returns per unit of risk. Litigation Capital Management is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,787  in Litigation Capital Management on September 14, 2024 and sell it today you would earn a total of  688.00  from holding Litigation Capital Management or generate 7.03% return on investment over 90 days.

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

Wheaton Precious Metals  vs.  Litigation Capital Management

Wheaton Precious Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Wheaton Precious may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Litigation Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Litigation Capital Management 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, Litigation Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wheaton Precious and Litigation Capital

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

The idea behind Wheaton Precious Metals and Litigation Capital Management 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.