Correlation Between Eldorado Gold and Nike

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

Diversification Opportunities for Eldorado Gold and Nike

-0.92

Correlation Coefficient

Eldorado Gold  Nike

Pay attention - limited upside

The 3 months correlation between Eldorado and Nike is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Nike go up and down completely randomly.

Pair Corralation between Eldorado Gold and Nike

Considering the 90-day investment horizon Eldorado Gold Corp is expected to under-perform the Nike. In addition to that, Eldorado Gold is 1.95 times more volatile than Nike Inc. It trades about 0.0 of its total potential returns per unit of risk. Nike Inc is currently generating about -0.01 per unit of volatility. If you would invest  9,256  in Nike Inc on January 31, 2024 and sell it today you would lose (30.00) from holding Nike Inc or give up 0.32% of portfolio value over 90 days.

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

Eldorado Gold Corp  vs.  Nike Inc

Eldorado Gold Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 11 (%) 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.

Nike Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Eldorado Gold and Nike

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

The idea behind Eldorado Gold Corp and Nike Inc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.