Correlation Between Aberdeen Diversified and Hochschild Mining

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

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

Diversification Opportunities for Aberdeen Diversified and Hochschild Mining

-0.25

Correlation Coefficient

Aberdeen Diversified  Hochschild Mining

Very good diversification

The 3 months correlation between Aberdeen and Hochschild is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Diversified Income 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 Aberdeen Diversified 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 Aberdeen Diversified Income 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 Aberdeen Diversified i.e., Aberdeen Diversified and Hochschild Mining go up and down completely randomly.

Pair Corralation between Aberdeen Diversified and Hochschild Mining

Assuming the 90 days trading horizon Aberdeen Diversified is expected to generate 13.04 times less return on investment than Hochschild Mining. But when comparing it to its historical volatility, Aberdeen Diversified Income is 1.52 times less risky than Hochschild Mining. It trades about 0.01 of its potential returns per unit of risk. Hochschild Mining plc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  17,960  in Hochschild Mining plc on September 20, 2024 and sell it today you would earn a total of  3,740  from holding Hochschild Mining plc or generate 20.82% return on investment over 90 days.

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

Aberdeen Diversified Income  vs.  Hochschild Mining plc

Aberdeen Diversified

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Diversified Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Aberdeen Diversified is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hochschild Mining plc

Risk-Adjusted Performance

8 of 100

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.

Pair Trading with Aberdeen Diversified and Hochschild Mining

The main advantage of trading using opposite Aberdeen Diversified and Hochschild Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen Diversified 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 Aberdeen Diversified Income 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.