Correlation Between Hochschild Mining and Rheinmetall

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

By analyzing existing cross correlation between Hochschild Mining plc and Rheinmetall AG, you can compare the effects of market volatilities on Hochschild Mining and Rheinmetall 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 Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hochschild Mining and Rheinmetall.

Diversification Opportunities for Hochschild Mining and Rheinmetall

-0.01

Correlation Coefficient

Hochschild Mining  Rheinmetall

Good diversification

The 3 months correlation between Hochschild and Rheinmetall is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hochschild Mining plc and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG 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 plc are associated (or correlated) with Rheinmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rheinmetall AG has no effect on the direction of Hochschild Mining i.e., Hochschild Mining and Rheinmetall go up and down completely randomly.

Pair Corralation between Hochschild Mining and Rheinmetall

Assuming the 90 days trading horizon Hochschild Mining is expected to generate 1.03 times less return on investment than Rheinmetall. In addition to that, Hochschild Mining is 1.38 times more volatile than Rheinmetall AG. It trades about 0.11 of its total potential returns per unit of risk. Rheinmetall AG is currently generating about 0.16 per unit of volatility. If you would invest  50,157  in Rheinmetall AG on October 7, 2024 and sell it today you would earn a total of  11,203  from holding Rheinmetall AG or generate 22.34% return on investment over 90 days.

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

Hochschild Mining plc  vs.  Rheinmetall AG

Hochschild Mining plc

Risk-Adjusted Performance

8 of 100

OK

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

Rheinmetall AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rheinmetall unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hochschild Mining and Rheinmetall

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

The idea behind Hochschild Mining plc and Rheinmetall AG 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.