Correlation Between Western Sierra and Eldorado Gold
Can any of the company-specific risk be diversified away by investing in both Western Sierra 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 Western Sierra and Eldorado Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Sierra Mining and Eldorado Gold Corp, you can compare the effects of market volatilities on Western Sierra 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 Western Sierra with a short position of Eldorado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Sierra and Eldorado Gold.
Diversification Opportunities for Western Sierra and Eldorado Gold
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Western and Eldorado is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining 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 Western Sierra 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 Western Sierra Mining 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 Western Sierra i.e., Western Sierra and Eldorado Gold go up and down completely randomly.
Pair Corralation between Western Sierra and Eldorado Gold
Given the investment horizon of 90 days Western Sierra Mining is expected to under-perform the Eldorado Gold. But the pink sheet apears to be less risky and, when comparing its historical volatility, Western Sierra Mining is 2.04 times less risky than Eldorado Gold. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Eldorado Gold Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,730 in Eldorado Gold Corp on August 29, 2024 and sell it today you would lose (160.00) from holding Eldorado Gold Corp or give up 9.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Western Sierra Mining vs. Eldorado Gold Corp
Performance |
| Timeline |
| Western Sierra Mining |
| Eldorado Gold Corp |
Western Sierra and Eldorado Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Sierra and Eldorado Gold
The main advantage of trading using opposite Western Sierra and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Sierra 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.| Western Sierra vs. Green Cures Botanical | Western Sierra vs. Cann American Corp | Western Sierra vs. Rimrock Gold Corp | Western Sierra vs. Galexxy Holdings |
| Eldorado Gold vs. IAMGold | Eldorado Gold vs. Kinross Gold | Eldorado Gold vs. Agnico Eagle Mines | Eldorado Gold vs. Gold Fields Ltd |
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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