Correlation Between Wesdome Gold and Eldorado Gold
Can any of the company-specific risk be diversified away by investing in both Wesdome Gold 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 Wesdome Gold and Eldorado Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesdome Gold Mines and Eldorado Gold Corp, you can compare the effects of market volatilities on Wesdome Gold 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 Wesdome Gold with a short position of Eldorado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesdome Gold and Eldorado Gold.
Diversification Opportunities for Wesdome Gold and Eldorado Gold
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wesdome and Eldorado is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Wesdome Gold Mines 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 Wesdome 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 Wesdome Gold Mines 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 Wesdome Gold i.e., Wesdome Gold and Eldorado Gold go up and down completely randomly.
Pair Corralation between Wesdome Gold and Eldorado Gold
Assuming the 90 days horizon Wesdome Gold Mines is expected to generate 1.15 times more return on investment than Eldorado Gold. However, Wesdome Gold is 1.15 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 0.05 per unit of risk. If you would invest 610.00 in Wesdome Gold Mines on August 31, 2024 and sell it today you would earn a total of 253.00 from holding Wesdome Gold Mines or generate 41.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesdome Gold Mines vs. Eldorado Gold Corp
Performance |
| Timeline |
| Wesdome Gold Mines |
| Eldorado Gold Corp |
Wesdome Gold and Eldorado Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesdome Gold and Eldorado Gold
The main advantage of trading using opposite Wesdome Gold and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesdome Gold 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.| Wesdome Gold vs. Victoria Gold Corp | Wesdome Gold vs. Cassiar Gold Corp | Wesdome Gold vs. Liberty Gold Corp | Wesdome Gold vs. I 80 Gold Corp |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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