Correlation Between AES Corp and Wheaton Precious

Can any of the company-specific risk be diversified away by investing in both AES Corp 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 AES Corp and Wheaton Precious into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AES Corp and Wheaton Precious Metals, you can compare the effects of market volatilities on AES Corp 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 AES Corp with a short position of Wheaton Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES Corp and Wheaton Precious.

Diversification Opportunities for AES Corp and Wheaton Precious

-0.19

Correlation Coefficient

AES Corp  Wheaton Precious

Good diversification

The 3 months correlation between AES and Wheaton is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding AES Corp 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 AES Corp 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 AES Corp 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 AES Corp i.e., AES Corp and Wheaton Precious go up and down completely randomly.

Pair Corralation between AES Corp and Wheaton Precious

Assuming the 90 days trading horizon AES Corp is expected to under-perform the Wheaton Precious. In addition to that, AES Corp is 1.01 times more volatile than Wheaton Precious Metals. It trades about -0.26 of its total potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.05 per unit of volatility. If you would invest  454,544  in Wheaton Precious Metals on September 25, 2024 and sell it today you would earn a total of  26,456  from holding Wheaton Precious Metals or generate 5.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

AES Corp  vs.  Wheaton Precious Metals

AES Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AES Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Wheaton Precious Metals

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Wheaton Precious may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AES Corp and Wheaton Precious

The main advantage of trading using opposite AES Corp and Wheaton Precious positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES Corp 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 AES Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.