Correlation Between IAMGold and Eldorado Gold

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

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

Diversification Opportunities for IAMGold and Eldorado Gold

0.36

Correlation Coefficient

IAMGold  Eldorado Gold

Weak diversification

The 3 months correlation between IAMGold and Eldorado is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding IAMGold 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 IAMGold 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 IAMGold 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 IAMGold i.e., IAMGold and Eldorado Gold go up and down completely randomly.

Pair Corralation between IAMGold and Eldorado Gold

Considering the 90-day investment horizon IAMGold is expected to generate 1.61 times more return on investment than Eldorado Gold. However, IAMGold is 1.61 times more volatile than Eldorado Gold Corp. It trades about 0.02 of its potential returns per unit of risk. Eldorado Gold Corp is currently generating about -0.08 per unit of risk. If you would invest  523.00  in IAMGold on September 28, 2024 and sell it today you would lose (3.00) from holding IAMGold or give up 0.57% of portfolio value over 90 days.

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

IAMGold  vs.  Eldorado Gold Corp

IAMGold

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IAMGold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IAMGold is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest fragile performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with IAMGold and Eldorado Gold

The main advantage of trading using opposite IAMGold and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAMGold 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 IAMGold 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.