Correlation Between Nike and Eldorado Gold

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

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

Diversification Opportunities for Nike and Eldorado Gold

-0.92

Correlation Coefficient

Nike  Eldorado Gold

Pay attention - limited upside

The 3 months correlation between Nike and Eldorado is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc 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 Nike 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 Nike Inc 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 Nike i.e., Nike and Eldorado Gold go up and down completely randomly.

Pair Corralation between Nike and Eldorado Gold

Considering the 90-day investment horizon Nike Inc is expected to generate 0.51 times more return on investment than Eldorado Gold. However, Nike Inc is 1.95 times less risky than Eldorado Gold. It trades about -0.01 of its potential returns per unit of risk. Eldorado Gold Corp is currently generating about 0.0 per unit of risk. If you would invest  9,256  in Nike Inc on February 1, 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

Nike Inc  vs.  Eldorado Gold Corp

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.

Eldorado Gold Corp

Risk-Adjusted Performance

5 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Eldorado Gold may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Nike and Eldorado Gold

The main advantage of trading using opposite Nike and Eldorado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.