Correlation Between Eldorado Gold and Gerdau SA
Can any of the company-specific risk be diversified away by investing in both Eldorado Gold and Gerdau SA 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 Gerdau SA 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 Gerdau SA ADR, you can compare the effects of market volatilities on Eldorado Gold and Gerdau SA 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 Gerdau SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eldorado Gold and Gerdau SA.
Diversification Opportunities for Eldorado Gold and Gerdau SA
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eldorado and Gerdau is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Gerdau SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA ADR 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 Gerdau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gerdau SA ADR has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Gerdau SA go up and down completely randomly.
Pair Corralation between Eldorado Gold and Gerdau SA
Considering the 90-day investment horizon Eldorado Gold Corp is expected to under-perform the Gerdau SA. In addition to that, Eldorado Gold is 1.65 times more volatile than Gerdau SA ADR. It trades about -0.06 of its total potential returns per unit of risk. Gerdau SA ADR is currently generating about -0.07 per unit of volatility. If you would invest 297.00 in Gerdau SA ADR on November 27, 2024 and sell it today you would lose (12.00) from holding Gerdau SA ADR or give up 4.04% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Eldorado Gold Corp vs. Gerdau SA ADR
Performance |
Timeline |
Eldorado Gold Corp |
Gerdau SA ADR |
Eldorado Gold and Gerdau SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eldorado Gold and Gerdau SA
The main advantage of trading using opposite Eldorado Gold and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eldorado Gold position performs unexpectedly, Gerdau SA 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 Gerdau SA will offset losses from the drop in Gerdau SA's long position.Eldorado Gold vs. IAMGold | ||
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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