Correlation Between Eldorado Gold and Centerra Gold

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

Diversification Opportunities for Eldorado Gold and Centerra Gold

0.06

Correlation Coefficient

Eldorado Gold  Centerra Gold

Significant diversification

The 3 months correlation between Eldorado and Centerra is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold 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 Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Centerra Gold go up and down completely randomly.

Pair Corralation between Eldorado Gold and Centerra Gold

Considering the 90-day investment horizon Eldorado Gold is expected to generate 1.12 times less return on investment than Centerra Gold. In addition to that, Eldorado Gold is 1.24 times more volatile than Centerra Gold. It trades about 0.06 of its total potential returns per unit of risk. Centerra Gold is currently generating about 0.08 per unit of volatility. If you would invest  566.00  in Centerra Gold on December 26, 2024 and sell it today you would earn a total of  63.00  from holding Centerra Gold or generate 11.13% 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.  Centerra Gold

Eldorado Gold Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Eldorado Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Centerra Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centerra Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Centerra Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eldorado Gold and Centerra Gold

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

The idea behind Eldorado Gold Corp and Centerra Gold 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.