Correlation Between Sapiens International and Eldorado Gold

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

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

Diversification Opportunities for Sapiens International and Eldorado Gold

-0.25

Correlation Coefficient

Sapiens International  Eldorado Gold

Very good diversification

The 3 months correlation between Sapiens and Eldorado is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sapiens International 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 Sapiens International 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 Sapiens International 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 Sapiens International i.e., Sapiens International and Eldorado Gold go up and down completely randomly.

Pair Corralation between Sapiens International and Eldorado Gold

Given the investment horizon of 90 days Sapiens International is expected to generate 3.68 times less return on investment than Eldorado Gold. But when comparing it to its historical volatility, Sapiens International is 1.94 times less risky than Eldorado Gold. It trades about 0.04 of its potential returns per unit of risk. Eldorado Gold Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,470  in Eldorado Gold Corp on December 29, 2024 and sell it today you would earn a total of  197.00  from holding Eldorado Gold Corp or generate 13.4% return on investment over 90 days.

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

Sapiens International  vs.  Eldorado Gold Corp

Sapiens International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sapiens International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sapiens International is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Eldorado Gold Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Eldorado Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sapiens International and Eldorado Gold

The main advantage of trading using opposite Sapiens International and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sapiens International 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 Sapiens International 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.