Correlation Between Wheaton Precious and Tree Island

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

Diversification Opportunities for Wheaton Precious and Tree Island

-0.2

Correlation Coefficient

Wheaton Precious  Tree Island

Good diversification

The 3 months correlation between Wheaton and Tree is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Tree Island Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree Island Steel 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 Tree Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree Island Steel has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Tree Island go up and down completely randomly.

Pair Corralation between Wheaton Precious and Tree Island

Assuming the 90 days trading horizon Wheaton Precious Metals is expected to generate 0.79 times more return on investment than Tree Island. However, Wheaton Precious Metals is 1.26 times less risky than Tree Island. It trades about 0.05 of its potential returns per unit of risk. Tree Island Steel is currently generating about 0.02 per unit of risk. If you would invest  5,946  in Wheaton Precious Metals on October 5, 2024 and sell it today you would earn a total of  2,420  from holding Wheaton Precious Metals or generate 40.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

Wheaton Precious Metals  vs.  Tree Island Steel

Wheaton Precious Metals

Risk-Adjusted Performance

2 of 100

Very 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.

Tree Island Steel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tree Island Steel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Tree Island may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wheaton Precious and Tree Island

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

The idea behind Wheaton Precious Metals and Tree Island Steel 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..