Correlation Between Apple and HEMISPHERE EGY

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

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

Diversification Opportunities for Apple and HEMISPHERE EGY

0.43

Correlation Coefficient

Apple  HEMISPHERE EGY

Very weak diversification

The 3 months correlation between Apple and HEMISPHERE is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and HEMISPHERE EGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEMISPHERE EGY and Apple 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 Apple Inc are associated (or correlated) with HEMISPHERE EGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEMISPHERE EGY has no effect on the direction of Apple i.e., Apple and HEMISPHERE EGY go up and down completely randomly.

Pair Corralation between Apple and HEMISPHERE EGY

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.87 times more return on investment than HEMISPHERE EGY. However, Apple Inc is 1.15 times less risky than HEMISPHERE EGY. It trades about 0.18 of its potential returns per unit of risk. HEMISPHERE EGY is currently generating about 0.13 per unit of risk. If you would invest  20,061  in Apple Inc on September 13, 2024 and sell it today you would earn a total of  3,714  from holding Apple Inc or generate 18.51% return on investment over 90 days.

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

Apple Inc  vs.  HEMISPHERE EGY

Apple Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

HEMISPHERE EGY

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEMISPHERE EGY are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HEMISPHERE EGY unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and HEMISPHERE EGY

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

The idea behind Apple Inc and HEMISPHERE EGY 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.