Correlation Between Wheaton Precious and Kinross Gold

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

Diversification Opportunities for Wheaton Precious and Kinross Gold

0.83

Correlation Coefficient

Wheaton Precious  Kinross Gold

Very poor diversification

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

Pair Corralation between Wheaton Precious and Kinross Gold

Considering the 90-day investment horizon Wheaton Precious is expected to generate 1.03 times less return on investment than Kinross Gold. But when comparing it to its historical volatility, Wheaton Precious Metals is 1.57 times less risky than Kinross Gold. It trades about 0.32 of its potential returns per unit of risk. Kinross Gold is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  917.00  in Kinross Gold on December 29, 2024 and sell it today you would earn a total of  334.00  from holding Kinross Gold or generate 36.42% 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.  Kinross Gold

Wheaton Precious Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Wheaton Precious displayed solid returns over the last few months and may actually be approaching a breakup point.

Kinross Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinross Gold are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Kinross Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wheaton Precious and Kinross Gold

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

The idea behind Wheaton Precious Metals and Kinross Gold 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.