Correlation Between Wheaton Precious and Allied Gold

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

Diversification Opportunities for Wheaton Precious and Allied Gold

0.54

Correlation Coefficient

Wheaton Precious  Allied Gold

Very weak diversification

The 3 months correlation between Wheaton and Allied is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Allied Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Gold 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 Allied Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Gold has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Allied Gold go up and down completely randomly.

Pair Corralation between Wheaton Precious and Allied Gold

Assuming the 90 days trading horizon Wheaton Precious Metals is expected to under-perform the Allied Gold. But the stock apears to be less risky and, when comparing its historical volatility, Wheaton Precious Metals is 1.86 times less risky than Allied Gold. The stock trades about -0.01 of its potential returns per unit of risk. The Allied Gold is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  313.00  in Allied Gold on October 10, 2024 and sell it today you would earn a total of  45.00  from holding Allied Gold or generate 14.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Wheaton Precious Metals  vs.  Allied Gold

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 very healthy primary indicators, Wheaton Precious is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Allied Gold

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Allied Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wheaton Precious and Allied Gold

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

The idea behind Wheaton Precious Metals and Allied Gold 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.