Correlation Between HEMISPHERE EGY and CVS Health

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

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

Diversification Opportunities for HEMISPHERE EGY and CVS Health

0.55

Correlation Coefficient

HEMISPHERE EGY  CVS Health

Very weak diversification

The 3 months correlation between HEMISPHERE and CVS is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding HEMISPHERE EGY and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and HEMISPHERE EGY 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 EGY are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of HEMISPHERE EGY i.e., HEMISPHERE EGY and CVS Health go up and down completely randomly.

Pair Corralation between HEMISPHERE EGY and CVS Health

Assuming the 90 days trading horizon HEMISPHERE EGY is expected to generate 0.63 times more return on investment than CVS Health. However, HEMISPHERE EGY is 1.58 times less risky than CVS Health. It trades about 0.12 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.0 per unit of risk. If you would invest  67.00  in HEMISPHERE EGY on September 14, 2024 and sell it today you would earn a total of  59.00  from holding HEMISPHERE EGY or generate 88.06% return on investment over 90 days.

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

HEMISPHERE EGY  vs.  CVS Health Corp

HEMISPHERE EGY

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEMISPHERE EGY are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HEMISPHERE EGY may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CVS Health Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CVS Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HEMISPHERE EGY and CVS Health

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

The idea behind HEMISPHERE EGY and CVS Health 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.