Correlation Between Microsoft and Hochschild Mining

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

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

Diversification Opportunities for Microsoft and Hochschild Mining

0.7

Correlation Coefficient

Microsoft  Hochschild Mining

Poor diversification

The 3 months correlation between Microsoft and Hochschild is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Hochschild Mining go up and down completely randomly.

Pair Corralation between Microsoft and Hochschild Mining

Given the investment horizon of 90 days Microsoft is expected to generate 1.95 times less return on investment than Hochschild Mining. But when comparing it to its historical volatility, Microsoft is 2.85 times less risky than Hochschild Mining. It trades about 0.06 of its potential returns per unit of risk. Hochschild Mining PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Hochschild Mining PLC on January 19, 2024 and sell it today you would earn a total of  51.00  from holding Hochschild Mining PLC or generate 37.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Microsoft  vs.  Hochschild Mining PLC

Microsoft

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Hochschild Mining PLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hochschild Mining PLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Hochschild Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Hochschild Mining

The main advantage of trading using opposite Microsoft and Hochschild Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..