Correlation Between Wheaton Precious and Gold Fields

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

Diversification Opportunities for Wheaton Precious and Gold Fields

0.83

Correlation Coefficient

Wheaton Precious  Gold Fields

Very poor diversification

The 3 months correlation between Wheaton and Gold is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Gold Fields Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields 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 Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Gold Fields go up and down completely randomly.

Pair Corralation between Wheaton Precious and Gold Fields

Considering the 90-day investment horizon Wheaton Precious is expected to generate 2.75 times less return on investment than Gold Fields. But when comparing it to its historical volatility, Wheaton Precious Metals is 1.18 times less risky than Gold Fields. It trades about 0.1 of its potential returns per unit of risk. Gold Fields Ltd is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,449  in Gold Fields Ltd on November 28, 2024 and sell it today you would earn a total of  480.00  from holding Gold Fields Ltd or generate 33.13% 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.  Gold Fields Ltd

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 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Wheaton Precious may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Gold Fields

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wheaton Precious and Gold Fields

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

The idea behind Wheaton Precious Metals and Gold Fields Ltd 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.