Correlation Between HEMISPHERE EGY and MGM CHINA

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

By analyzing existing cross correlation between HEMISPHERE EGY and MGM CHINA HLDGS, you can compare the effects of market volatilities on HEMISPHERE EGY and MGM CHINA 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 MGM CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEMISPHERE EGY and MGM CHINA.

Diversification Opportunities for HEMISPHERE EGY and MGM CHINA

0.63

Correlation Coefficient

HEMISPHERE EGY  MGM CHINA

Poor diversification

The 3 months correlation between HEMISPHERE and MGM is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding HEMISPHERE EGY and MGM CHINA HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM CHINA HLDGS 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 MGM CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM CHINA HLDGS has no effect on the direction of HEMISPHERE EGY i.e., HEMISPHERE EGY and MGM CHINA go up and down completely randomly.

Pair Corralation between HEMISPHERE EGY and MGM CHINA

Assuming the 90 days trading horizon HEMISPHERE EGY is expected to generate 0.84 times more return on investment than MGM CHINA. However, HEMISPHERE EGY is 1.19 times less risky than MGM CHINA. It trades about 0.13 of its potential returns per unit of risk. MGM CHINA HLDGS is currently generating about 0.05 per unit of risk. If you would invest  109.00  in HEMISPHERE EGY on September 13, 2024 and sell it today you would earn a total of  15.00  from holding HEMISPHERE EGY or generate 13.76% return on investment over 90 days.

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

HEMISPHERE EGY  vs.  MGM CHINA HLDGS

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.

MGM CHINA HLDGS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MGM CHINA HLDGS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MGM CHINA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HEMISPHERE EGY and MGM CHINA

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

The idea behind HEMISPHERE EGY and MGM CHINA HLDGS 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 CEOs Directory module to screen CEOs from public companies around the world.