Correlation Between Westlake Chemical and Eldorado Gold

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

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

Diversification Opportunities for Westlake Chemical and Eldorado Gold

-0.59

Correlation Coefficient

Westlake Chemical  Eldorado Gold

Excellent diversification

The 3 months correlation between Westlake and Eldorado is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical Partners 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 Westlake Chemical 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 Westlake Chemical Partners 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 Westlake Chemical i.e., Westlake Chemical and Eldorado Gold go up and down completely randomly.

Pair Corralation between Westlake Chemical and Eldorado Gold

Given the investment horizon of 90 days Westlake Chemical is expected to generate 4.36 times less return on investment than Eldorado Gold. But when comparing it to its historical volatility, Westlake Chemical Partners is 2.36 times less risky than Eldorado Gold. It trades about 0.03 of its potential returns per unit of risk. Eldorado Gold Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  920.00  in Eldorado Gold Corp on October 1, 2024 and sell it today you would earn a total of  577.00  from holding Eldorado Gold Corp or generate 62.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Westlake Chemical Partners  vs.  Eldorado Gold Corp

Westlake Chemical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westlake Chemical Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Westlake Chemical is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail 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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Westlake Chemical and Eldorado Gold

The main advantage of trading using opposite Westlake Chemical and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical 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 Westlake Chemical Partners 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.