Correlation Between Reliance Steel and Eldorado Gold

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

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

Diversification Opportunities for Reliance Steel and Eldorado Gold

-0.37

Correlation Coefficient

Reliance Steel  Eldorado Gold

Very good diversification

The 3 months correlation between Reliance and Eldorado is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum 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 Reliance Steel 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 Reliance Steel Aluminum 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 Reliance Steel i.e., Reliance Steel and Eldorado Gold go up and down completely randomly.

Pair Corralation between Reliance Steel and Eldorado Gold

Allowing for the 90-day total investment horizon Reliance Steel Aluminum is expected to under-perform the Eldorado Gold. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Steel Aluminum is 1.69 times less risky than Eldorado Gold. The stock trades about -0.49 of its potential returns per unit of risk. The Eldorado Gold Corp is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  1,666  in Eldorado Gold Corp on September 22, 2024 and sell it today you would lose (147.00) from holding Eldorado Gold Corp or give up 8.82% of portfolio value over 90 days.

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

Reliance Steel Aluminum  vs.  Eldorado Gold Corp

Reliance Steel Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Steel Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Reliance Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private 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 latest unfluctuating 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.

Pair Trading with Reliance Steel and Eldorado Gold

The main advantage of trading using opposite Reliance Steel and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel 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 Reliance Steel Aluminum 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.