Correlation Between Wheaton Precious and Lundin Mining

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

Diversification Opportunities for Wheaton Precious and Lundin Mining

-0.27

Correlation Coefficient

Wheaton Precious  Lundin Mining

Very good diversification

The 3 months correlation between Wheaton and Lundin is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Lundin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining 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 Lundin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Mining has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Lundin Mining go up and down completely randomly.

Pair Corralation between Wheaton Precious and Lundin Mining

Assuming the 90 days trading horizon Wheaton Precious Metals is expected to generate 0.81 times more return on investment than Lundin Mining. However, Wheaton Precious Metals is 1.23 times less risky than Lundin Mining. It trades about 0.14 of its potential returns per unit of risk. Lundin Mining is currently generating about -0.11 per unit of risk. If you would invest  8,635  in Wheaton Precious Metals on December 1, 2024 and sell it today you would earn a total of  1,354  from holding Wheaton Precious Metals or generate 15.68% return on investment over 90 days.

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

Wheaton Precious Metals  vs.  Lundin Mining

Wheaton Precious Metals

Risk-Adjusted Performance

OK

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 very unfluctuating primary indicators, Wheaton Precious displayed solid returns over the last few months and may actually be approaching a breakup point.

Lundin Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lundin Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Wheaton Precious and Lundin Mining

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

The idea behind Wheaton Precious Metals and Lundin Mining 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.