Correlation Between Wheaton Precious and Northern Superior

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

Diversification Opportunities for Wheaton Precious and Northern Superior

0.04

Correlation Coefficient

Wheaton Precious  Northern Superior

Significant diversification

The 3 months correlation between Wheaton and Northern is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Northern Superior Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Superior 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 Northern Superior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Superior has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Northern Superior go up and down completely randomly.

Pair Corralation between Wheaton Precious and Northern Superior

Assuming the 90 days trading horizon Wheaton Precious Metals is expected to under-perform the Northern Superior. But the stock apears to be less risky and, when comparing its historical volatility, Wheaton Precious Metals is 1.67 times less risky than Northern Superior. The stock trades about -0.14 of its potential returns per unit of risk. The Northern Superior Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Northern Superior Resources on October 6, 2024 and sell it today you would earn a total of  2.00  from holding Northern Superior Resources or generate 4.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Wheaton Precious Metals  vs.  Northern Superior Resources

Wheaton Precious Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Northern Superior

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Superior Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Northern Superior is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Wheaton Precious and Northern Superior

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

The idea behind Wheaton Precious Metals and Northern Superior Resources 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.