Correlation Between Consol Energy and Eldorado Gold

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

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

Diversification Opportunities for Consol Energy and Eldorado Gold

-0.1

Correlation Coefficient

Consol Energy  Eldorado Gold

Good diversification

The 3 months correlation between Consol and Eldorado is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy 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 Consol Energy 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 Consol Energy 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 Consol Energy i.e., Consol Energy and Eldorado Gold go up and down completely randomly.

Pair Corralation between Consol Energy and Eldorado Gold

Given the investment horizon of 90 days Consol Energy is expected to generate 0.96 times more return on investment than Eldorado Gold. However, Consol Energy is 1.05 times less risky than Eldorado Gold. It trades about -0.04 of its potential returns per unit of risk. Eldorado Gold Corp is currently generating about -0.14 per unit of risk. If you would invest  10,773  in Consol Energy on October 20, 2024 and sell it today you would lose (812.00) from holding Consol Energy or give up 7.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Consol Energy  vs.  Eldorado Gold Corp

Consol Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consol Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Consol Energy and Eldorado Gold

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

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.