Correlation Between Eldorado Gold and Guangdong Investment

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

Diversification Opportunities for Eldorado Gold and Guangdong Investment

0.16

Correlation Coefficient

Eldorado Gold  Guangdong Investment

Average diversification

The 3 months correlation between Eldorado and Guangdong is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Guangdong Investment go up and down completely randomly.

Pair Corralation between Eldorado Gold and Guangdong Investment

Considering the 90-day investment horizon Eldorado Gold Corp is expected to generate 1.71 times more return on investment than Guangdong Investment. However, Eldorado Gold is 1.71 times more volatile than Guangdong Investment Limited. It trades about 0.07 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.0 per unit of risk. If you would invest  1,497  in Eldorado Gold Corp on December 27, 2024 and sell it today you would earn a total of  170.00  from holding Eldorado Gold Corp or generate 11.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Eldorado Gold Corp  vs.  Guangdong Investment Limited

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 5 (%) 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.

Guangdong Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Guangdong Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eldorado Gold and Guangdong Investment

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

The idea behind Eldorado Gold Corp and Guangdong Investment Limited 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.