Correlation Between European Metals and Wheaton Precious

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

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

Diversification Opportunities for European Metals and Wheaton Precious

0.21

Correlation Coefficient

European Metals  Wheaton Precious

Modest diversification

The 3 months correlation between European and Wheaton is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings 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 European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and Wheaton Precious go up and down completely randomly.

Pair Corralation between European Metals and Wheaton Precious

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Wheaton Precious. In addition to that, European Metals is 1.55 times more volatile than Wheaton Precious Metals. It trades about -0.12 of its total potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.04 per unit of volatility. If you would invest  464,512  in Wheaton Precious Metals on September 15, 2024 and sell it today you would earn a total of  17,488  from holding Wheaton Precious Metals or generate 3.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

European Metals Holdings  vs.  Wheaton Precious Metals

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Wheaton Precious Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Wheaton Precious is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with European Metals and Wheaton Precious

The main advantage of trading using opposite European Metals and Wheaton Precious positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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 European Metals Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..