Correlation Between Eldorado Gold and US Silica

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

Diversification Opportunities for Eldorado Gold and US Silica

0.8

Correlation Coefficient

Eldorado Gold  US Silica

Very poor diversification

The 3 months correlation between Eldorado and SLCA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and US Silica Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Silica Holdings 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 US Silica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Silica Holdings has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and US Silica go up and down completely randomly.

Pair Corralation between Eldorado Gold and US Silica

Considering the 90-day investment horizon Eldorado Gold Corp is expected to under-perform the US Silica. But the stock apears to be less risky and, when comparing its historical volatility, Eldorado Gold Corp is 2.08 times less risky than US Silica. The stock trades about -0.03 of its potential returns per unit of risk. The US Silica Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,268  in US Silica Holdings on February 2, 2024 and sell it today you would earn a total of  278.00  from holding US Silica Holdings or generate 21.92% return on investment over 90 days.

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

Eldorado Gold Corp  vs.  US Silica Holdings

Eldorado Gold Corp

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Eldorado Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

US Silica Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Silica Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, US Silica sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eldorado Gold and US Silica

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

The idea behind Eldorado Gold Corp and US Silica Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.