Correlation Between Hochschild Mining and Europa Metals

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

Diversification Opportunities for Hochschild Mining and Europa Metals

0.0

Correlation Coefficient

Hochschild Mining  Europa Metals

Pay attention - limited upside

The 3 months correlation between Hochschild and Europa is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hochschild Mining plc and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals 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 Europa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europa Metals has no effect on the direction of Hochschild Mining i.e., Hochschild Mining and Europa Metals go up and down completely randomly.

Pair Corralation between Hochschild Mining and Europa Metals

Assuming the 90 days trading horizon Hochschild Mining plc is expected to generate 0.75 times more return on investment than Europa Metals. However, Hochschild Mining plc is 1.33 times less risky than Europa Metals. It trades about 0.15 of its potential returns per unit of risk. Europa Metals is currently generating about 0.04 per unit of risk. If you would invest  9,210  in Hochschild Mining plc on October 7, 2024 and sell it today you would earn a total of  13,090  from holding Hochschild Mining plc or generate 142.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

Hochschild Mining plc  vs.  Europa Metals

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.

Europa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Europa Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hochschild Mining and Europa Metals

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

The idea behind Hochschild Mining plc and Europa Metals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.