Correlation Between Wheaton Precious and Royal Gold
Can any of the company-specific risk be diversified away by investing in both Wheaton Precious and Royal Gold 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 Royal Gold 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 Royal Gold, you can compare the effects of market volatilities on Wheaton Precious and Royal Gold 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 Royal Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wheaton Precious and Royal Gold.
Diversification Opportunities for Wheaton Precious and Royal Gold
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wheaton and Royal is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals and Royal Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Gold 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 Royal Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Gold has no effect on the direction of Wheaton Precious i.e., Wheaton Precious and Royal Gold go up and down completely randomly.
Pair Corralation between Wheaton Precious and Royal Gold
Considering the 90-day investment horizon Wheaton Precious Metals is expected to generate 1.11 times more return on investment than Royal Gold. However, Wheaton Precious is 1.11 times more volatile than Royal Gold. It trades about 0.04 of its potential returns per unit of risk. Royal Gold is currently generating about 0.02 per unit of risk. If you would invest 4,407 in Wheaton Precious Metals on October 20, 2024 and sell it today you would earn a total of 1,370 from holding Wheaton Precious Metals or generate 31.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wheaton Precious Metals vs. Royal Gold
Performance |
| Timeline |
| Wheaton Precious Metals |
| Royal Gold |
Wheaton Precious and Royal Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wheaton Precious and Royal Gold
The main advantage of trading using opposite Wheaton Precious and Royal Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wheaton Precious position performs unexpectedly, Royal Gold 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 Royal Gold will offset losses from the drop in Royal Gold's long position.| Wheaton Precious vs. Royal Gold | Wheaton Precious vs. Agnico Eagle Mines | Wheaton Precious vs. Sandstorm Gold Ltd | Wheaton Precious vs. Osisko Gold Ro |
| Royal Gold vs. Wheaton Precious Metals | Royal Gold vs. Agnico Eagle Mines | Royal Gold vs. Sandstorm Gold Ltd | Royal Gold vs. Osisko Gold Ro |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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