Correlation Between Welsbach Technology and Eldorado Gold

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

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

Diversification Opportunities for Welsbach Technology and Eldorado Gold

0.29

Correlation Coefficient

Welsbach Technology  Eldorado Gold

Modest diversification

The 3 months correlation between Welsbach and Eldorado is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Welsbach Technology Metals 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 Welsbach Technology 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 Welsbach Technology Metals 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 Welsbach Technology i.e., Welsbach Technology and Eldorado Gold go up and down completely randomly.

Pair Corralation between Welsbach Technology and Eldorado Gold

Given the investment horizon of 90 days Welsbach Technology Metals is expected to under-perform the Eldorado Gold. But the stock apears to be less risky and, when comparing its historical volatility, Welsbach Technology Metals is 4.44 times less risky than Eldorado Gold. The stock trades about -0.01 of its potential returns per unit of risk. The Eldorado Gold Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. 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	100.0%
Values	Daily Returns

Welsbach Technology Metals  vs.  Eldorado Gold Corp

Welsbach Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Welsbach Technology Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Welsbach Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 weak 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 Welsbach Technology and Eldorado Gold

The main advantage of trading using opposite Welsbach Technology and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Welsbach Technology 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 Welsbach Technology Metals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.