Correlation Between Federal National and Hochschild Mining

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Can any of the company-specific risk be diversified away by investing in both Federal National 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 Federal National and Hochschild Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal National Mortgage and Hochschild Mining PLC, you can compare the effects of market volatilities on Federal National 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 Federal National with a short position of Hochschild Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Hochschild Mining.

Diversification Opportunities for Federal National and Hochschild Mining

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Federal and Hochschild is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage 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 Federal National 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 Federal National Mortgage 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 Federal National i.e., Federal National and Hochschild Mining go up and down completely randomly.

Pair Corralation between Federal National and Hochschild Mining

Assuming the 90 days horizon Federal National Mortgage is expected to generate 1.04 times more return on investment than Hochschild Mining. However, Federal National is 1.04 times more volatile than Hochschild Mining PLC. It trades about 0.04 of its potential returns per unit of risk. Hochschild Mining PLC is currently generating about 0.02 per unit of risk. If you would invest  925,000  in Federal National Mortgage on December 30, 2023 and sell it today you would earn a total of  275,000  from holding Federal National Mortgage or generate 29.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

Federal National Mortgage  vs.  Hochschild Mining PLC

 Performance 
       Timeline  
Federal National Mortgage 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Federal National displayed solid returns over the last few months and may actually be approaching a breakup point.
Hochschild Mining PLC 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Hochschild Mining PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Hochschild Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Federal National and Hochschild Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Federal National and Hochschild Mining

The main advantage of trading using opposite Federal National and Hochschild Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National 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 Federal National Mortgage 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.
Check out your portfolio center.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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