Correlation Between Constellium and Eldorado Gold

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

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

Diversification Opportunities for Constellium and Eldorado Gold

0.52

Correlation Coefficient

Constellium  Eldorado Gold

Very weak diversification

The 3 months correlation between Constellium and Eldorado is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv 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 Constellium 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 Constellium Nv 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 Constellium i.e., Constellium and Eldorado Gold go up and down completely randomly.

Pair Corralation between Constellium and Eldorado Gold

Given the investment horizon of 90 days Constellium Nv is expected to under-perform the Eldorado Gold. In addition to that, Constellium is 1.79 times more volatile than Eldorado Gold Corp. It trades about -0.09 of its total potential returns per unit of risk. Eldorado Gold Corp is currently generating about -0.03 per unit of volatility. If you would invest  1,779  in Eldorado Gold Corp on September 12, 2024 and sell it today you would lose (114.00) from holding Eldorado Gold Corp or give up 6.41% of portfolio value over 90 days.

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

Constellium Nv  vs.  Eldorado Gold Corp

Constellium Nv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellium Nv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic 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.

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.

Pair Trading with Constellium and Eldorado Gold

The main advantage of trading using opposite Constellium and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium 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 Constellium Nv 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.