Correlation Between Huaneng Power and Hochschild Mining

Can any of the company-specific risk be diversified away by investing in both Huaneng Power and Hochschild Mining 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 Huaneng Power and Hochschild Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huaneng Power International and Hochschild Mining plc, you can compare the effects of market volatilities on Huaneng Power and Hochschild Mining 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 Huaneng Power with a short position of Hochschild Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaneng Power and Hochschild Mining.

Diversification Opportunities for Huaneng Power and Hochschild Mining

0.2

Correlation Coefficient

Huaneng Power  Hochschild Mining

Modest diversification

The 3 months correlation between Huaneng and Hochschild is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Huaneng Power International and Hochschild Mining plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hochschild Mining plc and Huaneng Power 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 Huaneng Power International are associated (or correlated) with Hochschild Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hochschild Mining plc has no effect on the direction of Huaneng Power i.e., Huaneng Power and Hochschild Mining go up and down completely randomly.

Pair Corralation between Huaneng Power and Hochschild Mining

Assuming the 90 days trading horizon Huaneng Power International is expected to under-perform the Hochschild Mining. But the stock apears to be less risky and, when comparing its historical volatility, Huaneng Power International is 1.65 times less risky than Hochschild Mining. The stock trades about -0.06 of its potential returns per unit of risk. The Hochschild Mining plc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  286.00  in Hochschild Mining plc on October 24, 2024 and sell it today you would lose (15.00) from holding Hochschild Mining plc or give up 5.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Huaneng Power International  vs.  Hochschild Mining plc

Huaneng Power Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaneng Power International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Hochschild Mining plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hochschild Mining plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hochschild Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Huaneng Power and Hochschild Mining

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

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