Correlation Between NL Industries and Eldorado Gold
Can any of the company-specific risk be diversified away by investing in both NL Industries 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 NL Industries and Eldorado Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Eldorado Gold Corp, you can compare the effects of market volatilities on NL Industries 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 NL Industries with a short position of Eldorado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Eldorado Gold.
Diversification Opportunities for NL Industries and Eldorado Gold
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between NL Industries and Eldorado is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries 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 NL Industries 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 NL Industries 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 NL Industries i.e., NL Industries and Eldorado Gold go up and down completely randomly.
Pair Corralation between NL Industries and Eldorado Gold
Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.23 times more return on investment than Eldorado Gold. However, NL Industries is 1.23 times more volatile than Eldorado Gold Corp. It trades about 0.06 of its potential returns per unit of risk. Eldorado Gold Corp is currently generating about -0.11 per unit of risk. If you would invest 782.00 in NL Industries on August 28, 2024 and sell it today you would earn a total of 26.00 from holding NL Industries or generate 3.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NL Industries vs. Eldorado Gold Corp
Performance |
| Timeline |
| NL Industries |
| Eldorado Gold Corp |
NL Industries and Eldorado Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Eldorado Gold
The main advantage of trading using opposite NL Industries and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries 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.| NL Industries vs. Park Electrochemical | NL Industries vs. Innovative Solutions and | NL Industries vs. Curtiss Wright | NL Industries vs. National Presto Industries |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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