Correlation Between Eldorado Gold and BW LPG
Can any of the company-specific risk be diversified away by investing in both Eldorado Gold and BW LPG 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 BW LPG 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 BW LPG Limited, you can compare the effects of market volatilities on Eldorado Gold and BW LPG 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 BW LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eldorado Gold and BW LPG.
Diversification Opportunities for Eldorado Gold and BW LPG
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eldorado and BWLP is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and BW LPG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG Limited 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 BW LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW LPG Limited has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and BW LPG go up and down completely randomly.
Pair Corralation between Eldorado Gold and BW LPG
Considering the 90-day investment horizon Eldorado Gold Corp is expected to under-perform the BW LPG. In addition to that, Eldorado Gold is 1.36 times more volatile than BW LPG Limited. It trades about -0.11 of its total potential returns per unit of risk. BW LPG Limited is currently generating about -0.02 per unit of volatility. If you would invest 1,330 in BW LPG Limited on August 28, 2024 and sell it today you would lose (19.00) from holding BW LPG Limited or give up 1.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eldorado Gold Corp vs. BW LPG Limited
Performance |
| Timeline |
| Eldorado Gold Corp |
| BW LPG Limited |
Eldorado Gold and BW LPG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eldorado Gold and BW LPG
The main advantage of trading using opposite Eldorado Gold and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eldorado Gold position performs unexpectedly, BW LPG 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 BW LPG will offset losses from the drop in BW LPG's long position.The idea behind Eldorado Gold Corp and BW LPG Limited 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.| BW LPG vs. Eldorado Gold Corp | BW LPG vs. Emerson Electric | BW LPG vs. Aerofoam Metals | BW LPG vs. RBC Bearings Incorporated |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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