Correlation Between United States and Wheaton Precious

Can any of the company-specific risk be diversified away by investing in both United States and Wheaton Precious 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 United States and Wheaton Precious into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United States Steel and Wheaton Precious Metals, you can compare the effects of market volatilities on United States and Wheaton Precious 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 United States with a short position of Wheaton Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Wheaton Precious.

Diversification Opportunities for United States and Wheaton Precious

0.6

Correlation Coefficient

United States  Wheaton Precious

Poor diversification

The 3 months correlation between United and Wheaton is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals and United States 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 United States Steel are associated (or correlated) with Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of United States i.e., United States and Wheaton Precious go up and down completely randomly.

Pair Corralation between United States and Wheaton Precious

Taking into account the 90-day investment horizon United States Steel is expected to under-perform the Wheaton Precious. In addition to that, United States is 1.81 times more volatile than Wheaton Precious Metals. It trades about -0.27 of its total potential returns per unit of risk. Wheaton Precious Metals is currently generating about -0.14 per unit of volatility. If you would invest  6,094  in Wheaton Precious Metals on September 24, 2024 and sell it today you would lose (363.00) from holding Wheaton Precious Metals or give up 5.96% of portfolio value over 90 days.

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

United States Steel  vs.  Wheaton Precious Metals

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with United States and Wheaton Precious

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

The idea behind United States Steel and Wheaton Precious Metals 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.