Correlation Between Eldorado Gold and Gold Fields

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

Diversification Opportunities for Eldorado Gold and Gold Fields

0.59

Correlation Coefficient

Eldorado Gold  Gold Fields

Very weak diversification

The 3 months correlation between Eldorado and Gold is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Gold Fields Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields 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 Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Gold Fields go up and down completely randomly.

Pair Corralation between Eldorado Gold and Gold Fields

Considering the 90-day investment horizon Eldorado Gold Corp is expected to generate 1.03 times more return on investment than Gold Fields. However, Eldorado Gold is 1.03 times more volatile than Gold Fields Ltd. It trades about -0.12 of its potential returns per unit of risk. Gold Fields Ltd is currently generating about -0.23 per unit of risk. If you would invest  1,713  in Eldorado Gold Corp on August 27, 2024 and sell it today you would lose (144.00) from holding Eldorado Gold Corp or give up 8.41% of portfolio value over 90 days.

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

Eldorado Gold Corp  vs.  Gold Fields Ltd

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 very healthy technical and fundamental indicators, Eldorado Gold is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Gold Fields

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Eldorado Gold and Gold Fields

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

The idea behind Eldorado Gold Corp and Gold Fields Ltd 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.