Correlation Between Eldorado Gold and Deswell Industries

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

Diversification Opportunities for Eldorado Gold and Deswell Industries

-0.01

Correlation Coefficient

Eldorado Gold  Deswell Industries

Good diversification

The 3 months correlation between Eldorado and Deswell is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries 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 Deswell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deswell Industries has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Deswell Industries go up and down completely randomly.

Pair Corralation between Eldorado Gold and Deswell Industries

Considering the 90-day investment horizon Eldorado Gold Corp is expected to generate 1.59 times more return on investment than Deswell Industries. However, Eldorado Gold is 1.59 times more volatile than Deswell Industries. It trades about 0.17 of its potential returns per unit of risk. Deswell Industries is currently generating about 0.1 per unit of risk. If you would invest  1,407  in Eldorado Gold Corp on January 28, 2024 and sell it today you would earn a total of  113.00  from holding Eldorado Gold Corp or generate 8.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Eldorado Gold Corp  vs.  Deswell Industries

Eldorado Gold Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Eldorado Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Deswell Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deswell Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Eldorado Gold and Deswell Industries

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

The idea behind Eldorado Gold Corp and Deswell Industries 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.