Correlation Between Eldorado Gold and Pan American

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

Diversification Opportunities for Eldorado Gold and Pan American

-0.25

Correlation Coefficient

Eldorado Gold  Pan American

Very good diversification

The 3 months correlation between Eldorado and Pan is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Pan American go up and down completely randomly.

Pair Corralation between Eldorado Gold and Pan American

Considering the 90-day investment horizon Eldorado Gold Corp is expected to under-perform the Pan American. In addition to that, Eldorado Gold is 1.1 times more volatile than Pan American Silver. It trades about -0.05 of its total potential returns per unit of risk. Pan American Silver is currently generating about 0.08 per unit of volatility. If you would invest  2,197  in Pan American Silver on November 28, 2024 and sell it today you would earn a total of  241.00  from holding Pan American Silver or generate 10.97% 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.  Pan American Silver

Eldorado Gold Corp

Risk-Adjusted Performance

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 latest fragile performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pan American Silver

Risk-Adjusted Performance

Modest

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

Pair Trading with Eldorado Gold and Pan American

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

The idea behind Eldorado Gold Corp and Pan American Silver 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.