Correlation Between MAS Gold and Eldorado Gold

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

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

Diversification Opportunities for MAS Gold and Eldorado Gold

0.28

Correlation Coefficient

MAS Gold  Eldorado Gold

Modest diversification

The 3 months correlation between MAS and Eldorado is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding MAS Gold Corp 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 MAS 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 MAS Gold Corp 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 MAS Gold i.e., MAS Gold and Eldorado Gold go up and down completely randomly.

Pair Corralation between MAS Gold and Eldorado Gold

Assuming the 90 days horizon MAS Gold Corp is expected to generate 12.48 times more return on investment than Eldorado Gold. However, MAS Gold is 12.48 times more volatile than Eldorado Gold Corp. It trades about 0.11 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  2.00  in MAS Gold Corp on September 25, 2024 and sell it today you would lose (0.50) from holding MAS Gold Corp or give up 25.0% of portfolio value over 90 days.

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

MAS Gold Corp  vs.  Eldorado Gold Corp

MAS Gold Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAS Gold Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MAS Gold showed solid returns over the last few months and may actually be approaching a breakup point.

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 latest abnormal 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 MAS Gold and Eldorado Gold

The main advantage of trading using opposite MAS Gold and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAS Gold 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 MAS Gold Corp 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..