Correlation Between Wheaton Precious and Rathdowney Resources

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

Diversification Opportunities for Wheaton Precious and Rathdowney Resources

-0.48

Correlation Coefficient

Wheaton Precious  Rathdowney Resources

Very good diversification

The 3 months correlation between Wheaton and Rathdowney is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Rathdowney Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rathdowney Resources 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 Rathdowney Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rathdowney Resources has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Rathdowney Resources go up and down completely randomly.

Pair Corralation between Wheaton Precious and Rathdowney Resources

Assuming the 90 days trading horizon Wheaton Precious is expected to generate 4.63 times less return on investment than Rathdowney Resources. But when comparing it to its historical volatility, Wheaton Precious Metals is 5.71 times less risky than Rathdowney Resources. It trades about 0.04 of its potential returns per unit of risk. Rathdowney Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Rathdowney Resources on January 26, 2024 and sell it today you would lose (2.00) from holding Rathdowney Resources or give up 66.67% of portfolio value over 90 days.

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

Wheaton Precious Metals  vs.  Rathdowney Resources

Wheaton Precious Metals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Wheaton Precious displayed solid returns over the last few months and may actually be approaching a breakup point.

Rathdowney Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rathdowney Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Rathdowney Resources is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Wheaton Precious and Rathdowney Resources

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

The idea behind Wheaton Precious Metals and Rathdowney Resources 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.