Correlation Between Hochschild Mining and Mercantile Investment

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

Diversification Opportunities for Hochschild Mining and Mercantile Investment

0.08

Correlation Coefficient

Hochschild Mining  Mercantile Investment

Significant diversification

The 3 months correlation between Hochschild and Mercantile is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hochschild Mining plc and The Mercantile Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Mercantile Investment 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 Mercantile Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Mercantile Investment has no effect on the direction of Hochschild Mining i.e., Hochschild Mining and Mercantile Investment go up and down completely randomly.

Pair Corralation between Hochschild Mining and Mercantile Investment

Assuming the 90 days trading horizon Hochschild Mining plc is expected to generate 2.62 times more return on investment than Mercantile Investment. However, Hochschild Mining is 2.62 times more volatile than The Mercantile Investment. It trades about 0.1 of its potential returns per unit of risk. The Mercantile Investment is currently generating about 0.02 per unit of risk. If you would invest  6,445  in Hochschild Mining plc on October 5, 2024 and sell it today you would earn a total of  15,705  from holding Hochschild Mining plc or generate 243.68% return on investment over 90 days.

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

Hochschild Mining plc  vs.  The Mercantile Investment

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 uncertain technical and fundamental indicators, Hochschild Mining exhibited solid returns over the last few months and may actually be approaching a breakup point.

The Mercantile Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Mercantile Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Mercantile Investment 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 Mercantile Investment

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

The idea behind Hochschild Mining plc and The Mercantile Investment 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.