Correlation Between First Majestic and Eldorado Gold

Can any of the company-specific risk be diversified away by investing in both First Majestic 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 First Majestic and Eldorado Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Majestic Silver and Eldorado Gold Corp, you can compare the effects of market volatilities on First Majestic 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 First Majestic with a short position of Eldorado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and Eldorado Gold.

Diversification Opportunities for First Majestic and Eldorado Gold

0.65

Correlation Coefficient

First Majestic  Eldorado Gold

Poor diversification

The 3 months correlation between First and Eldorado is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver 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 First Majestic 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 First Majestic Silver 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 First Majestic i.e., First Majestic and Eldorado Gold go up and down completely randomly.

Pair Corralation between First Majestic and Eldorado Gold

Allowing for the 90-day total investment horizon First Majestic Silver is expected to under-perform the Eldorado Gold. In addition to that, First Majestic is 1.49 times more volatile than Eldorado Gold Corp. It trades about -0.08 of its total potential returns per unit of risk. Eldorado Gold Corp is currently generating about -0.08 per unit of volatility. If you would invest  1,570  in Eldorado Gold Corp on September 27, 2024 and sell it today you would lose (66.00) from holding Eldorado Gold Corp or give up 4.2% of portfolio value over 90 days.

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

First Majestic Silver  vs.  Eldorado Gold Corp

First Majestic Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Majestic Silver has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 fragile 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.

Pair Trading with First Majestic and Eldorado Gold

The main advantage of trading using opposite First Majestic and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic 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.

The idea behind First Majestic Silver and Eldorado Gold Corp 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.