Correlation Between Century Aluminum and Eldorado Gold
Can any of the company-specific risk be diversified away by investing in both Century Aluminum and Eldorado 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 Century Aluminum and Eldorado Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and Eldorado Gold Corp, you can compare the effects of market volatilities on Century Aluminum and Eldorado 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 Century Aluminum with a short position of Eldorado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and Eldorado Gold.
Diversification Opportunities for Century Aluminum and Eldorado Gold
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Century and Eldorado is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Eldorado Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eldorado Gold Corp and Century Aluminum 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 Century Aluminum are associated (or correlated) with Eldorado Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eldorado Gold Corp has no effect on the direction of Century Aluminum i.e., Century Aluminum and Eldorado Gold go up and down completely randomly.
Pair Corralation between Century Aluminum and Eldorado Gold
Given the investment horizon of 90 days Century Aluminum is expected to generate 1.74 times more return on investment than Eldorado Gold. However, Century Aluminum is 1.74 times more volatile than Eldorado Gold Corp. It trades about 0.12 of its potential returns per unit of risk. Eldorado Gold Corp is currently generating about 0.12 per unit of risk. If you would invest 1,047 in Century Aluminum on August 27, 2024 and sell it today you would earn a total of 1,202 from holding Century Aluminum or generate 114.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Aluminum vs. Eldorado Gold Corp
Performance |
| Timeline |
| Century Aluminum |
| Eldorado Gold Corp |
Century Aluminum and Eldorado Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Aluminum and Eldorado Gold
The main advantage of trading using opposite Century Aluminum and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, Eldorado 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 Eldorado Gold will offset losses from the drop in Eldorado Gold's long position.The idea behind Century Aluminum and Eldorado Gold Corp 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.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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