Correlation Between HOCHSCHILD MINING and CARSALES

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

By analyzing existing cross correlation between HOCHSCHILD MINING and CARSALESCOM, you can compare the effects of market volatilities on HOCHSCHILD MINING and CARSALES 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 CARSALES. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOCHSCHILD MINING and CARSALES.

Diversification Opportunities for HOCHSCHILD MINING and CARSALES

0.46

Correlation Coefficient

HOCHSCHILD MINING  CARSALES

Very weak diversification

The 3 months correlation between HOCHSCHILD and CARSALES is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding HOCHSCHILD MINING and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of HOCHSCHILD MINING i.e., HOCHSCHILD MINING and CARSALES go up and down completely randomly.

Pair Corralation between HOCHSCHILD MINING and CARSALES

Assuming the 90 days trading horizon HOCHSCHILD MINING is expected to generate 2.64 times more return on investment than CARSALES. However, HOCHSCHILD MINING is 2.64 times more volatile than CARSALESCOM. It trades about 0.12 of its potential returns per unit of risk. CARSALESCOM is currently generating about 0.14 per unit of risk. If you would invest  203.00  in HOCHSCHILD MINING on September 2, 2024 and sell it today you would earn a total of  58.00  from holding HOCHSCHILD MINING or generate 28.57% return on investment over 90 days.

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

HOCHSCHILD MINING  vs.  CARSALESCOM

HOCHSCHILD MINING

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HOCHSCHILD MINING are ranked lower than 9 (%) 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.

CARSALESCOM

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CARSALES may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HOCHSCHILD MINING and CARSALES

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

The idea behind HOCHSCHILD MINING and CARSALESCOM 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.