Correlation Between Dolly Varden and Wheaton Precious

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Can any of the company-specific risk be diversified away by investing in both Dolly Varden 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 Dolly Varden and Wheaton Precious into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dolly Varden Silver and Wheaton Precious Metals, you can compare the effects of market volatilities on Dolly Varden 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 Dolly Varden with a short position of Wheaton Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dolly Varden and Wheaton Precious.

Diversification Opportunities for Dolly Varden and Wheaton Precious

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Dolly and Wheaton is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dolly Varden Silver 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 Dolly Varden 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 Dolly Varden Silver 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 Dolly Varden i.e., Dolly Varden and Wheaton Precious go up and down completely randomly.

Pair Corralation between Dolly Varden and Wheaton Precious

Assuming the 90 days trading horizon Dolly Varden Silver is expected to generate 2.21 times more return on investment than Wheaton Precious. However, Dolly Varden is 2.21 times more volatile than Wheaton Precious Metals. It trades about 0.07 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.05 per unit of risk. If you would invest  81.00  in Dolly Varden Silver on August 31, 2024 and sell it today you would earn a total of  28.00  from holding Dolly Varden Silver or generate 34.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy29.37%
ValuesDaily Returns

Dolly Varden Silver  vs.  Wheaton Precious Metals

 Performance 
       Timeline  
Dolly Varden Silver 

Risk-Adjusted Performance

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Strong
Modest
Over the last 90 days Dolly Varden Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady basic indicators, Dolly Varden unveiled solid returns over the last few months and may actually be approaching a breakup point.
Wheaton Precious Metals 

Risk-Adjusted Performance

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Weak
 
Strong
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 rather sound technical and fundamental indicators, Wheaton Precious is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dolly Varden and Wheaton Precious Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dolly Varden and Wheaton Precious

The main advantage of trading using opposite Dolly Varden and Wheaton Precious positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dolly Varden 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 Dolly Varden Silver 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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