Correlation Between Wheaton Precious and Equinox Gold

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

Diversification Opportunities for Wheaton Precious and Equinox Gold

0.82

Correlation Coefficient

Wheaton Precious  Equinox Gold

Very poor diversification

The 3 months correlation between Wheaton and Equinox is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Equinox Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinox Gold Corp 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 Equinox Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinox Gold Corp has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Equinox Gold go up and down completely randomly.

Pair Corralation between Wheaton Precious and Equinox Gold

Assuming the 90 days trading horizon Wheaton Precious Metals is expected to generate 0.58 times more return on investment than Equinox Gold. However, Wheaton Precious Metals is 1.73 times less risky than Equinox Gold. It trades about 0.35 of its potential returns per unit of risk. Equinox Gold Corp is currently generating about 0.19 per unit of risk. If you would invest  8,404  in Wheaton Precious Metals on November 20, 2024 and sell it today you would earn a total of  1,167  from holding Wheaton Precious Metals or generate 13.89% return on investment over 90 days.

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

Wheaton Precious Metals  vs.  Equinox Gold Corp

Wheaton Precious Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Wheaton Precious may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Equinox Gold Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equinox Gold Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Equinox Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wheaton Precious and Equinox Gold

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

The idea behind Wheaton Precious Metals and Equinox Gold Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..