Correlation Between Eldorado Gold and African Agriculture
Can any of the company-specific risk be diversified away by investing in both Eldorado Gold and African Agriculture 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 Eldorado Gold and African Agriculture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eldorado Gold Corp and African Agriculture Holdings, you can compare the effects of market volatilities on Eldorado Gold and African Agriculture 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 Eldorado Gold with a short position of African Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eldorado Gold and African Agriculture.
Diversification Opportunities for Eldorado Gold and African Agriculture
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eldorado and African is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and African Agriculture Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Agriculture and Eldorado Gold 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 Eldorado Gold Corp are associated (or correlated) with African Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Agriculture has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and African Agriculture go up and down completely randomly.
Pair Corralation between Eldorado Gold and African Agriculture
Considering the 90-day investment horizon Eldorado Gold is expected to generate 7.56 times less return on investment than African Agriculture. But when comparing it to its historical volatility, Eldorado Gold Corp is 13.11 times less risky than African Agriculture. It trades about 0.1 of its potential returns per unit of risk. African Agriculture Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6.59 in African Agriculture Holdings on September 12, 2024 and sell it today you would lose (6.22) from holding African Agriculture Holdings or give up 94.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 77.04% |
| Values | Daily Returns |
Eldorado Gold Corp vs. African Agriculture Holdings
Performance |
| Timeline |
| Eldorado Gold Corp |
| African Agriculture |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Eldorado Gold and African Agriculture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eldorado Gold and African Agriculture
The main advantage of trading using opposite Eldorado Gold and African Agriculture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eldorado Gold position performs unexpectedly, African Agriculture 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 African Agriculture will offset losses from the drop in African Agriculture's long position.| Eldorado Gold vs. IAMGold | Eldorado Gold vs. Kinross Gold | Eldorado Gold vs. Agnico Eagle Mines | Eldorado Gold vs. Gold Fields Ltd |
| African Agriculture vs. Sabre Corpo | African Agriculture vs. Verde Clean Fuels | African Agriculture vs. Sandstorm Gold Ltd | African Agriculture vs. Eldorado Gold 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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