Correlation Between NioCorp Developments and Eldorado Gold

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

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

Diversification Opportunities for NioCorp Developments and Eldorado Gold

0.73

Correlation Coefficient

NioCorp Developments  Eldorado Gold

Poor diversification

The 3 months correlation between NioCorp and Eldorado is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd 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 NioCorp Developments 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 NioCorp Developments Ltd 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 NioCorp Developments i.e., NioCorp Developments and Eldorado Gold go up and down completely randomly.

Pair Corralation between NioCorp Developments and Eldorado Gold

Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to under-perform the Eldorado Gold. In addition to that, NioCorp Developments is 1.89 times more volatile than Eldorado Gold Corp. It trades about -0.07 of its total potential returns per unit of risk. Eldorado Gold Corp is currently generating about 0.0 per unit of volatility. If you would invest  1,635  in Eldorado Gold Corp on September 3, 2024 and sell it today you would lose (35.00) from holding Eldorado Gold Corp or give up 2.14% of portfolio value over 90 days.

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

NioCorp Developments Ltd  vs.  Eldorado Gold Corp

NioCorp Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NioCorp Developments Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 very healthy technical and fundamental indicators, Eldorado Gold is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NioCorp Developments and Eldorado Gold

The main advantage of trading using opposite NioCorp Developments and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NioCorp Developments 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 NioCorp Developments Ltd 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.