Correlation Between Eldorado Gold and Iridium Communications

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

Diversification Opportunities for Eldorado Gold and Iridium Communications

0.36

Correlation Coefficient

Eldorado Gold  Iridium Communications

Weak diversification

The 3 months correlation between Eldorado and Iridium is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Iridium Communications go up and down completely randomly.

Pair Corralation between Eldorado Gold and Iridium Communications

Considering the 90-day investment horizon Eldorado Gold Corp is expected to generate 1.04 times more return on investment than Iridium Communications. However, Eldorado Gold is 1.04 times more volatile than Iridium Communications. It trades about 0.05 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.05 per unit of risk. If you would invest  953.00  in Eldorado Gold Corp on October 24, 2024 and sell it today you would earn a total of  549.00  from holding Eldorado Gold Corp or generate 57.61% return on investment over 90 days.

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

Eldorado Gold Corp  vs.  Iridium Communications

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.

Iridium Communications

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Iridium Communications is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eldorado Gold and Iridium Communications

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

The idea behind Eldorado Gold Corp and Iridium Communications 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.