Correlation Between Eldorado Gold and Olympic Steel

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

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

Diversification Opportunities for Eldorado Gold and Olympic Steel

0.28

Correlation Coefficient

Eldorado Gold  Olympic Steel

Modest diversification

The 3 months correlation between Eldorado and Olympic is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel and Eldorado Gold 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 Eldorado Gold Corp are associated (or correlated) with Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Olympic Steel go up and down completely randomly.

Pair Corralation between Eldorado Gold and Olympic Steel

Considering the 90-day investment horizon Eldorado Gold Corp is expected to generate 1.59 times more return on investment than Olympic Steel. However, Eldorado Gold is 1.59 times more volatile than Olympic Steel. It trades about 0.13 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.19 per unit of risk. If you would invest  1,438  in Eldorado Gold Corp on January 30, 2024 and sell it today you would earn a total of  82.00  from holding Eldorado Gold Corp or generate 5.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Eldorado Gold Corp  vs.  Olympic Steel

Eldorado Gold Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 12 (%) 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.

Olympic Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eldorado Gold and Olympic Steel

The main advantage of trading using opposite Eldorado Gold and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eldorado Gold position performs unexpectedly, Olympic Steel 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 Olympic Steel will offset losses from the drop in Olympic Steel's long position.

The idea behind Eldorado Gold Corp and Olympic Steel 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.