Correlation Between American International and Wheaton Precious
Can any of the company-specific risk be diversified away by investing in both American International 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 American International and Wheaton Precious into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American International Group and Wheaton Precious Metals, you can compare the effects of market volatilities on American International 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 American International with a short position of Wheaton Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of American International and Wheaton Precious.
Diversification Opportunities for American International and Wheaton Precious
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Wheaton is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding American International Group 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 American International 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 American International Group 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 American International i.e., American International and Wheaton Precious go up and down completely randomly.
Pair Corralation between American International and Wheaton Precious
Assuming the 90 days trading horizon American International Group is expected to under-perform the Wheaton Precious. But the stock apears to be less risky and, when comparing its historical volatility, American International Group is 1.81 times less risky than Wheaton Precious. The stock trades about -0.16 of its potential returns per unit of risk. The Wheaton Precious Metals is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 474,480 in Wheaton Precious Metals on September 12, 2024 and sell it today you would earn a total of 25,520 from holding Wheaton Precious Metals or generate 5.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
American International Group vs. Wheaton Precious Metals
Performance |
| Timeline |
| American International |
| Wheaton Precious Metals |
American International and Wheaton Precious Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American International and Wheaton Precious
The main advantage of trading using opposite American International and Wheaton Precious positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American International 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.| American International vs. Coor Service Management | American International vs. Check Point Software | American International vs. SMA Solar Technology | American International vs. BW Offshore |
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Check out your portfolio center.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.
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