Correlation Between Hochschild Mining and Beowulf Mining

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

Diversification Opportunities for Hochschild Mining and Beowulf Mining

0.24

Correlation Coefficient

Hochschild Mining  Beowulf Mining

Modest diversification

The 3 months correlation between Hochschild and Beowulf is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hochschild Mining plc and Beowulf Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beowulf Mining 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 Beowulf Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beowulf Mining has no effect on the direction of Hochschild Mining i.e., Hochschild Mining and Beowulf Mining go up and down completely randomly.

Pair Corralation between Hochschild Mining and Beowulf Mining

Assuming the 90 days trading horizon Hochschild Mining plc is expected to generate 0.85 times more return on investment than Beowulf Mining. However, Hochschild Mining plc is 1.18 times less risky than Beowulf Mining. It trades about -0.05 of its potential returns per unit of risk. Beowulf Mining is currently generating about -0.05 per unit of risk. If you would invest  21,250  in Hochschild Mining plc on November 27, 2024 and sell it today you would lose (2,790) from holding Hochschild Mining plc or give up 13.13% of portfolio value over 90 days.

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

Hochschild Mining plc  vs.  Beowulf Mining

Hochschild Mining plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hochschild Mining plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Beowulf Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beowulf Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators 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 Hochschild Mining and Beowulf Mining

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

The idea behind Hochschild Mining plc and Beowulf Mining 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.