Correlation Between Wheaton Precious and Solid State

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

Diversification Opportunities for Wheaton Precious and Solid State

0.38

Correlation Coefficient

Wheaton Precious  Solid State

Weak diversification

The 3 months correlation between Wheaton and Solid is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Solid State Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid State Plc 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 Solid State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid State Plc has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Solid State go up and down completely randomly.

Pair Corralation between Wheaton Precious and Solid State

Assuming the 90 days trading horizon Wheaton Precious is expected to generate 2.28 times less return on investment than Solid State. But when comparing it to its historical volatility, Wheaton Precious Metals is 1.7 times less risky than Solid State. It trades about 0.14 of its potential returns per unit of risk. Solid State Plc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  12,681  in Solid State Plc on December 24, 2024 and sell it today you would earn a total of  6,319  from holding Solid State Plc or generate 49.83% 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.  Solid State Plc

Wheaton Precious Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Wheaton Precious exhibited solid returns over the last few months and may actually be approaching a breakup point.

Solid State Plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solid State Plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Solid State unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wheaton Precious and Solid State

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

The idea behind Wheaton Precious Metals and Solid State Plc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.