Correlation Between Eldorado Gold and Harmony Gold

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

Diversification Opportunities for Eldorado Gold and Harmony Gold

0.74

Correlation Coefficient

Eldorado Gold  Harmony Gold

Poor diversification

The 3 months correlation between Eldorado and Harmony is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold Mining 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 Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Harmony Gold go up and down completely randomly.

Pair Corralation between Eldorado Gold and Harmony Gold

Considering the 90-day investment horizon Eldorado Gold Corp is expected to generate 0.89 times more return on investment than Harmony Gold. However, Eldorado Gold Corp is 1.12 times less risky than Harmony Gold. It trades about -0.12 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.24 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	Significant
Accuracy	100.0%
Values	Daily Returns

Eldorado Gold Corp  vs.  Harmony Gold Mining

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.

Harmony Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmony Gold Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Harmony Gold is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eldorado Gold and Harmony Gold

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

The idea behind Eldorado Gold Corp and Harmony Gold Mining 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.