Correlation Between First Quantum and Eldorado Gold

Can any of the company-specific risk be diversified away by investing in both First Quantum and Eldorado 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 First Quantum and Eldorado Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Quantum Minerals and Eldorado Gold Corp, you can compare the effects of market volatilities on First Quantum and Eldorado 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 First Quantum with a short position of Eldorado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Quantum and Eldorado Gold.

Diversification Opportunities for First Quantum and Eldorado Gold

0.48

Correlation Coefficient

First Quantum  Eldorado Gold

Very weak diversification

The 3 months correlation between First and Eldorado is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding First Quantum Minerals and Eldorado Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eldorado Gold Corp and First Quantum 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 First Quantum Minerals are associated (or correlated) with Eldorado Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eldorado Gold Corp has no effect on the direction of First Quantum i.e., First Quantum and Eldorado Gold go up and down completely randomly.

Pair Corralation between First Quantum and Eldorado Gold

Assuming the 90 days horizon First Quantum Minerals is expected to generate 1.02 times more return on investment than Eldorado Gold. However, First Quantum is 1.02 times more volatile than Eldorado Gold Corp. It trades about -0.02 of its potential returns per unit of risk. Eldorado Gold Corp is currently generating about -0.04 per unit of risk. If you would invest  1,916  in First Quantum Minerals on December 1, 2024 and sell it today you would lose (121.00) from holding First Quantum Minerals or give up 6.32% of portfolio value over 90 days.

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

First Quantum Minerals  vs.  Eldorado Gold Corp

First Quantum Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Quantum Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, First Quantum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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

Pair Trading with First Quantum and Eldorado Gold

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

The idea behind First Quantum Minerals and Eldorado Gold Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.