Correlation Between Stepan and Eldorado Gold

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

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

Diversification Opportunities for Stepan and Eldorado Gold

0.38

Correlation Coefficient

Stepan  Eldorado Gold

Weak diversification

The 3 months correlation between Stepan and Eldorado is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company 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 Stepan 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 Stepan Company 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 Stepan i.e., Stepan and Eldorado Gold go up and down completely randomly.

Pair Corralation between Stepan and Eldorado Gold

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Eldorado Gold. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 1.42 times less risky than Eldorado Gold. The stock trades about -0.09 of its potential returns per unit of risk. The Eldorado Gold Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,635  in Eldorado Gold Corp on October 3, 2024 and sell it today you would lose (148.00) from holding Eldorado Gold Corp or give up 9.05% of portfolio value over 90 days.

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

Stepan Company  vs.  Eldorado Gold Corp

Stepan Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Stepan and Eldorado Gold

The main advantage of trading using opposite Stepan and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan 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 Stepan Company 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..