Correlation Between Hemisphere Energy and InPlay Oil

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

By analyzing existing cross correlation between Hemisphere Energy and InPlay Oil Corp, you can compare the effects of market volatilities on Hemisphere Energy and InPlay Oil 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 Hemisphere Energy with a short position of InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hemisphere Energy and InPlay Oil.

Diversification Opportunities for Hemisphere Energy and InPlay Oil

0.23

Correlation Coefficient

Hemisphere Energy  InPlay Oil

Modest diversification

The 3 months correlation between Hemisphere and InPlay is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp and Hemisphere Energy 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 Hemisphere Energy are associated (or correlated) with InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and InPlay Oil go up and down completely randomly.

Pair Corralation between Hemisphere Energy and InPlay Oil

Assuming the 90 days horizon Hemisphere Energy is expected to generate 0.92 times more return on investment than InPlay Oil. However, Hemisphere Energy is 1.09 times less risky than InPlay Oil. It trades about 0.07 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.11 per unit of risk. If you would invest  126.00  in Hemisphere Energy on September 3, 2024 and sell it today you would earn a total of  9.00  from holding Hemisphere Energy or generate 7.14% return on investment over 90 days.

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

Hemisphere Energy  vs.  InPlay Oil Corp

Hemisphere Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hemisphere Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hemisphere Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Hemisphere Energy and InPlay Oil

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

The idea behind Hemisphere Energy and InPlay Oil Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..