Correlation Between Eldorado Gold and Black Hills

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

Diversification Opportunities for Eldorado Gold and Black Hills

-0.37

Correlation Coefficient

Eldorado Gold  Black Hills

Very good diversification

The 3 months correlation between Eldorado and Black is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills 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 Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Black Hills go up and down completely randomly.

Pair Corralation between Eldorado Gold and Black Hills

Considering the 90-day investment horizon Eldorado Gold Corp is expected to generate 2.33 times more return on investment than Black Hills. However, Eldorado Gold is 2.33 times more volatile than Black Hills. It trades about 0.08 of its potential returns per unit of risk. Black Hills is currently generating about 0.05 per unit of risk. If you would invest  1,470  in Eldorado Gold Corp on December 28, 2024 and sell it today you would earn a total of  197.00  from holding Eldorado Gold Corp or generate 13.4% 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.  Black Hills

Eldorado Gold Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Eldorado Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Black Hills

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Black Hills is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Eldorado Gold and Black Hills

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

The idea behind Eldorado Gold Corp and Black Hills 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.