Correlation Between Hochschild Mining and Naked Wines

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

Diversification Opportunities for Hochschild Mining and Naked Wines

-0.27

Correlation Coefficient

Hochschild Mining  Naked Wines

Very good diversification

The 3 months correlation between Hochschild and Naked is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hochschild Mining plc and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Hochschild Mining i.e., Hochschild Mining and Naked Wines go up and down completely randomly.

Pair Corralation between Hochschild Mining and Naked Wines

Assuming the 90 days trading horizon Hochschild Mining plc is expected to under-perform the Naked Wines. In addition to that, Hochschild Mining is 1.01 times more volatile than Naked Wines plc. It trades about -0.04 of its total potential returns per unit of risk. Naked Wines plc is currently generating about 0.12 per unit of volatility. If you would invest  5,070  in Naked Wines plc on November 29, 2024 and sell it today you would earn a total of  1,230  from holding Naked Wines plc or generate 24.26% return on investment over 90 days.

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

Hochschild Mining plc  vs.  Naked Wines 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.

Naked Wines plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Naked Wines unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hochschild Mining and Naked Wines

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

The idea behind Hochschild Mining plc and Naked Wines 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.