Correlation Between Hochschild Mining and Overstock

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

Diversification Opportunities for Hochschild Mining and Overstock

-0.56

Correlation Coefficient

Hochschild Mining  Overstock

Excellent diversification

The 3 months correlation between Hochschild and Overstock is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hochschild Mining plc and Overstock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstock 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 Overstock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstock has no effect on the direction of Hochschild Mining i.e., Hochschild Mining and Overstock go up and down completely randomly.

Pair Corralation between Hochschild Mining and Overstock

Assuming the 90 days trading horizon Hochschild Mining plc is expected to generate 0.55 times more return on investment than Overstock. However, Hochschild Mining plc is 1.81 times less risky than Overstock. It trades about 0.09 of its potential returns per unit of risk. Overstock is currently generating about -0.14 per unit of risk. If you would invest  18,160  in Hochschild Mining plc on September 22, 2024 and sell it today you would earn a total of  3,140  from holding Hochschild Mining plc or generate 17.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Hochschild Mining plc  vs.  Overstock

Hochschild Mining plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hochschild Mining plc are ranked lower than 7 (%) 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.

Overstock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Overstock has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hochschild Mining and Overstock

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

The idea behind Hochschild Mining plc and Overstock 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.