Correlation Between Hochschild Mining and Tata Steel

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

Diversification Opportunities for Hochschild Mining and Tata Steel

0.53

Correlation Coefficient

Hochschild Mining  Tata Steel

Very weak diversification

The 3 months correlation between Hochschild and Tata is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hochschild Mining plc and Tata Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Steel Limited 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 Tata Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Steel Limited has no effect on the direction of Hochschild Mining i.e., Hochschild Mining and Tata Steel go up and down completely randomly.

Pair Corralation between Hochschild Mining and Tata Steel

Assuming the 90 days trading horizon Hochschild Mining plc is expected to generate 1.97 times more return on investment than Tata Steel. However, Hochschild Mining is 1.97 times more volatile than Tata Steel Limited. It trades about 0.1 of its potential returns per unit of risk. Tata Steel Limited is currently generating about 0.14 per unit of risk. If you would invest  21,350  in Hochschild Mining plc on December 25, 2024 and sell it today you would earn a total of  4,850  from holding Hochschild Mining plc or generate 22.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Hochschild Mining plc  vs.  Tata Steel Limited

Hochschild Mining plc

Risk-Adjusted Performance

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.

Tata Steel Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Steel Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Tata Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hochschild Mining and Tata Steel

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

The idea behind Hochschild Mining plc and Tata Steel Limited 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.