Correlation Between Eldorado Gold and Alcoa Corp

Can any of the company-specific risk be diversified away by investing in both Eldorado Gold and Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp, you can compare the effects of market volatilities on Eldorado Gold and Alcoa Corp 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 Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eldorado Gold and Alcoa Corp.

Diversification Opportunities for Eldorado Gold and Alcoa Corp

0.3

Correlation Coefficient

Eldorado Gold  Alcoa Corp

Weak diversification

The 3 months correlation between Eldorado and Alcoa is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Alcoa Corp go up and down completely randomly.

Pair Corralation between Eldorado Gold and Alcoa Corp

Considering the 90-day investment horizon Eldorado Gold is expected to generate 2.08 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, Eldorado Gold Corp is 1.2 times less risky than Alcoa Corp. It trades about 0.07 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,432  in Alcoa Corp on May 7, 2025 and sell it today you would earn a total of  480.00  from holding Alcoa Corp or generate 19.74% return on investment over 90 days.

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

Eldorado Gold Corp  vs.  Alcoa Corp

Eldorado Gold Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Eldorado Gold may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Alcoa Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eldorado Gold and Alcoa Corp

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

The idea behind Eldorado Gold Corp and Alcoa 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.