Correlation Between Summit Materials and Eldorado Gold

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

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

Diversification Opportunities for Summit Materials and Eldorado Gold

0.27

Correlation Coefficient

Summit Materials  Eldorado Gold

Modest diversification

The 3 months correlation between Summit and Eldorado is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials 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 Summit Materials 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 Summit Materials 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 Summit Materials i.e., Summit Materials and Eldorado Gold go up and down completely randomly.

Pair Corralation between Summit Materials and Eldorado Gold

Considering the 90-day investment horizon Summit Materials is expected to under-perform the Eldorado Gold. But the stock apears to be less risky and, when comparing its historical volatility, Summit Materials is 1.14 times less risky than Eldorado Gold. The stock trades about -0.07 of its potential returns per unit of risk. The Eldorado Gold Corp is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  1,306  in Eldorado Gold Corp on January 16, 2024 and sell it today you would earn a total of  204.00  from holding Eldorado Gold Corp or generate 15.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Summit Materials  vs.  Eldorado Gold Corp

Summit Materials

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Eldorado Gold Corp

Risk-Adjusted Performance

8 of 100

OK

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.

Pair Trading with Summit Materials and Eldorado Gold

The main advantage of trading using opposite Summit Materials and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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 Summit Materials 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.