Correlation Between Eldorado Gold and Agnico Eagle

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

Diversification Opportunities for Eldorado Gold and Agnico Eagle

0.52

Correlation Coefficient

Eldorado Gold  Agnico Eagle

Very weak diversification

The 3 months correlation between Eldorado and Agnico is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Agnico Eagle Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agnico Eagle Mines 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 Agnico Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agnico Eagle Mines has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Agnico Eagle go up and down completely randomly.

Pair Corralation between Eldorado Gold and Agnico Eagle

Assuming the 90 days trading horizon Eldorado Gold is expected to generate 2.12 times less return on investment than Agnico Eagle. In addition to that, Eldorado Gold is 1.27 times more volatile than Agnico Eagle Mines. It trades about 0.04 of its total potential returns per unit of risk. Agnico Eagle Mines is currently generating about 0.11 per unit of volatility. If you would invest  8,937  in Agnico Eagle Mines on September 3, 2024 and sell it today you would earn a total of  2,869  from holding Agnico Eagle Mines or generate 32.1% return on investment over 90 days.

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

Eldorado Gold Corp  vs.  Agnico Eagle Mines

Eldorado Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

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

Agnico Eagle Mines

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Agnico Eagle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eldorado Gold and Agnico Eagle

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

The idea behind Eldorado Gold Corp and Agnico Eagle Mines 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.