Correlation Between Eldorado Gold and Western Digital

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

Diversification Opportunities for Eldorado Gold and Western Digital

0.11

Correlation Coefficient

Eldorado Gold  Western Digital

Average diversification

The 3 months correlation between Eldorado and Western is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Western Digital go up and down completely randomly.

Pair Corralation between Eldorado Gold and Western Digital

Considering the 90-day investment horizon Eldorado Gold is expected to generate 1.1 times less return on investment than Western Digital. But when comparing it to its historical volatility, Eldorado Gold Corp is 1.0 times less risky than Western Digital. It trades about 0.06 of its potential returns per unit of risk. Western Digital is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,141  in Western Digital on September 21, 2024 and sell it today you would earn a total of  2,821  from holding Western Digital or generate 89.81% return on investment over 90 days.

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

Eldorado Gold Corp  vs.  Western Digital

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Western Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Eldorado Gold and Western Digital

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

The idea behind Eldorado Gold Corp and Western Digital 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.