Correlation Between Dow and Wheaton Precious
Can any of the company-specific risk be diversified away by investing in both Dow 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 Dow and Wheaton Precious into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Inc and Wheaton Precious Metals, you can compare the effects of market volatilities on Dow 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 Dow with a short position of Wheaton Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow and Wheaton Precious.
Diversification Opportunities for Dow and Wheaton Precious
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Wheaton is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc 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 Dow 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 Dow Inc 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 Dow i.e., Dow and Wheaton Precious go up and down completely randomly.
Pair Corralation between Dow and Wheaton Precious
Considering the 90-day investment horizon Dow Inc is expected to under-perform the Wheaton Precious. In addition to that, Dow is 1.06 times more volatile than Wheaton Precious Metals. It trades about -0.1 of its total potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.31 per unit of volatility. If you would invest 5,624 in Wheaton Precious Metals on November 1, 2024 and sell it today you would earn a total of 652.50 from holding Wheaton Precious Metals or generate 11.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Inc vs. Wheaton Precious Metals
Performance |
| Timeline |
| Dow Inc |
| Wheaton Precious Metals |
Dow and Wheaton Precious Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow and Wheaton Precious
The main advantage of trading using opposite Dow and Wheaton Precious positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 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 Dow Inc 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.| Wheaton Precious vs. Agnico Eagle Mines | Wheaton Precious vs. Pan American Silver | Wheaton Precious vs. Kinross Gold | Wheaton Precious vs. Newmont Goldcorp Corp |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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