Correlation Between Eldorado Gold and Jacobs Solutions

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

Diversification Opportunities for Eldorado Gold and Jacobs Solutions

-0.26

Correlation Coefficient

Eldorado Gold  Jacobs Solutions

Very good diversification

The 3 months correlation between Eldorado and Jacobs is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions 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 Jacobs Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacobs Solutions has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Eldorado Gold and Jacobs Solutions

Considering the 90-day investment horizon Eldorado Gold Corp is expected to under-perform the Jacobs Solutions. In addition to that, Eldorado Gold is 1.58 times more volatile than Jacobs Solutions. It trades about -0.01 of its total potential returns per unit of risk. Jacobs Solutions is currently generating about 0.13 per unit of volatility. If you would invest  12,065  in Jacobs Solutions on September 14, 2024 and sell it today you would earn a total of  1,537  from holding Jacobs Solutions or generate 12.74% return on investment over 90 days.

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

Eldorado Gold Corp  vs.  Jacobs Solutions

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 recent stock price disarray, may contribute to short-term losses for the investors.

Jacobs Solutions

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, Jacobs Solutions revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eldorado Gold and Jacobs Solutions

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

The idea behind Eldorado Gold Corp and Jacobs Solutions 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.