Correlation Between Eldorado Gold and Gerdau SA

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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

EldoradoGerdauDiversified AwayEldoradoGerdauDiversified Away100%
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 Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Eldorado Gold Corp  vs.  Gerdau SA ADR

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-15-10-50510
JavaScript chart by amCharts 3.21.15EGO GGB
       Timeline  
Eldorado Gold Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Eldorado Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb13.51414.51515.51616.51717.5
Gerdau SA ADR 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Gerdau SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2.72.82.933.13.23.33.43.5

Eldorado Gold and Gerdau SA Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.94-3.7-2.46-1.22-0.02071.172.383.64.816.02 0.040.050.060.070.08
JavaScript chart by amCharts 3.21.15EGO GGB
       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.
The idea behind Eldorado Gold Corp and Gerdau SA ADR 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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