Correlation Between HOCHSCHILD MINING and SOLSTAD OFFSHORE

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

By analyzing existing cross correlation between HOCHSCHILD MINING and SOLSTAD OFFSHORE NK, you can compare the effects of market volatilities on HOCHSCHILD MINING and SOLSTAD OFFSHORE 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 HOCHSCHILD MINING with a short position of SOLSTAD OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOCHSCHILD MINING and SOLSTAD OFFSHORE.

Diversification Opportunities for HOCHSCHILD MINING and SOLSTAD OFFSHORE

0.04

Correlation Coefficient

HOCHSCHILD MINING  SOLSTAD OFFSHORE

Significant diversification

The 3 months correlation between HOCHSCHILD and SOLSTAD is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding HOCHSCHILD MINING and SOLSTAD OFFSHORE NK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOLSTAD OFFSHORE and HOCHSCHILD MINING 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 HOCHSCHILD MINING are associated (or correlated) with SOLSTAD OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOLSTAD OFFSHORE has no effect on the direction of HOCHSCHILD MINING i.e., HOCHSCHILD MINING and SOLSTAD OFFSHORE go up and down completely randomly.

Pair Corralation between HOCHSCHILD MINING and SOLSTAD OFFSHORE

Assuming the 90 days trading horizon HOCHSCHILD MINING is expected to generate 1.81 times more return on investment than SOLSTAD OFFSHORE. However, HOCHSCHILD MINING is 1.81 times more volatile than SOLSTAD OFFSHORE NK. It trades about 0.1 of its potential returns per unit of risk. SOLSTAD OFFSHORE NK is currently generating about -0.03 per unit of risk. If you would invest  254.00  in HOCHSCHILD MINING on December 23, 2024 and sell it today you would earn a total of  56.00  from holding HOCHSCHILD MINING or generate 22.05% return on investment over 90 days.

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

HOCHSCHILD MINING  vs.  SOLSTAD OFFSHORE NK

HOCHSCHILD MINING

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HOCHSCHILD MINING are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, HOCHSCHILD MINING exhibited solid returns over the last few months and may actually be approaching a breakup point.

SOLSTAD OFFSHORE

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOLSTAD OFFSHORE NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SOLSTAD OFFSHORE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HOCHSCHILD MINING and SOLSTAD OFFSHORE

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

The idea behind HOCHSCHILD MINING and SOLSTAD OFFSHORE NK 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.