Correlation Between Wheaton Precious and Paramount Gold

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

Diversification Opportunities for Wheaton Precious and Paramount Gold

0.46

Correlation Coefficient

Wheaton Precious  Paramount Gold

Very weak diversification

The 3 months correlation between Wheaton and Paramount is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Paramount Gold Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Gold Nevada 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 Paramount Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Gold Nevada has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Paramount Gold go up and down completely randomly.

Pair Corralation between Wheaton Precious and Paramount Gold

Considering the 90-day investment horizon Wheaton Precious Metals is expected to under-perform the Paramount Gold. But the stock apears to be less risky and, when comparing its historical volatility, Wheaton Precious Metals is 1.74 times less risky than Paramount Gold. The stock trades about -0.21 of its potential returns per unit of risk. The Paramount Gold Nevada is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Paramount Gold Nevada on October 8, 2024 and sell it today you would lose (1.00) from holding Paramount Gold Nevada or give up 2.7% of portfolio value over 90 days.

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

Wheaton Precious Metals  vs.  Paramount Gold Nevada

Wheaton Precious Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wheaton Precious Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Wheaton Precious is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Paramount Gold Nevada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paramount Gold Nevada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Wheaton Precious and Paramount Gold

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

The idea behind Wheaton Precious Metals and Paramount Gold Nevada 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.