Correlation Between NetEase and Hochschild Mining

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

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

Diversification Opportunities for NetEase and Hochschild Mining

-0.52

Correlation Coefficient

NetEase  Hochschild Mining

Excellent diversification

The 3 months correlation between NetEase and Hochschild is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NetEase 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 NetEase 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 NetEase 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 NetEase i.e., NetEase and Hochschild Mining go up and down completely randomly.

Pair Corralation between NetEase and Hochschild Mining

Given the investment horizon of 90 days NetEase is expected to generate 0.74 times more return on investment than Hochschild Mining. However, NetEase is 1.36 times less risky than Hochschild Mining. It trades about 0.17 of its potential returns per unit of risk. Hochschild Mining PLC is currently generating about -0.01 per unit of risk. If you would invest  7,722  in NetEase on October 11, 2024 and sell it today you would earn a total of  1,506  from holding NetEase or generate 19.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

NetEase  vs.  Hochschild Mining PLC

NetEase

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, NetEase may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hochschild Mining PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hochschild Mining PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Hochschild Mining may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NetEase and Hochschild Mining

The main advantage of trading using opposite NetEase and Hochschild Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetEase 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 NetEase 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.