Correlation Between Eldorado Gold and Alamos Gold

Can any of the company-specific risk be diversified away by investing in both Eldorado Gold and Alamos 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 Eldorado Gold and Alamos Gold 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 Alamos Gold, you can compare the effects of market volatilities on Eldorado Gold and Alamos 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 Eldorado Gold with a short position of Alamos Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eldorado Gold and Alamos Gold.

Diversification Opportunities for Eldorado Gold and Alamos Gold

0.88

Correlation Coefficient

Eldorado Gold  Alamos Gold

Very poor diversification

The 3 months correlation between Eldorado and Alamos is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Alamos Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamos Gold 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 Alamos Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamos Gold has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Alamos Gold go up and down completely randomly.

Pair Corralation between Eldorado Gold and Alamos Gold

Considering the 90-day investment horizon Eldorado Gold Corp is expected to under-perform the Alamos Gold. In addition to that, Eldorado Gold is 1.23 times more volatile than Alamos Gold. It trades about -0.01 of its total potential returns per unit of risk. Alamos Gold is currently generating about 0.03 per unit of volatility. If you would invest  1,843  in Alamos Gold on September 3, 2024 and sell it today you would earn a total of  39.00  from holding Alamos Gold or generate 2.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Eldorado Gold Corp  vs.  Alamos Gold

Eldorado Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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 very healthy technical and fundamental indicators, Eldorado Gold is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Alamos Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alamos Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Alamos Gold is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Eldorado Gold and Alamos Gold

The main advantage of trading using opposite Eldorado Gold and Alamos Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eldorado Gold position performs unexpectedly, Alamos 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 Alamos Gold will offset losses from the drop in Alamos Gold's long position.

The idea behind Eldorado Gold Corp and Alamos Gold 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.