Correlation Between Hochschild Mining and Vodafone Group

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

Diversification Opportunities for Hochschild Mining and Vodafone Group

0.31

Correlation Coefficient

Hochschild Mining  Vodafone Group

Weak diversification

The 3 months correlation between Hochschild and Vodafone is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hochschild Mining plc and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of Hochschild Mining i.e., Hochschild Mining and Vodafone Group go up and down completely randomly.

Pair Corralation between Hochschild Mining and Vodafone Group

Assuming the 90 days trading horizon Hochschild Mining plc is expected to generate 1.5 times more return on investment than Vodafone Group. However, Hochschild Mining is 1.5 times more volatile than Vodafone Group PLC. It trades about 0.16 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about 0.03 per unit of risk. If you would invest  17,000  in Hochschild Mining plc on November 29, 2024 and sell it today you would earn a total of  1,800  from holding Hochschild Mining plc or generate 10.59% return on investment over 90 days.

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

Hochschild Mining plc  vs.  Vodafone Group PLC

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 unsteady 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.

Vodafone Group PLC

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Hochschild Mining plc and Vodafone Group PLC 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 Transaction History module to view history of all your transactions and understand their impact on performance.