Correlation Between Hemisphere Energy and Major Drilling

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

By analyzing existing cross correlation between Hemisphere Energy Corp and Major Drilling Group, you can compare the effects of market volatilities on Hemisphere Energy and Major Drilling 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 Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hemisphere Energy and Major Drilling.

Diversification Opportunities for Hemisphere Energy and Major Drilling

0.41

Correlation Coefficient

Hemisphere Energy  Major Drilling

Very weak diversification

The 3 months correlation between Hemisphere and Major is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy Corp and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group 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 Corp are associated (or correlated) with Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and Major Drilling go up and down completely randomly.

Pair Corralation between Hemisphere Energy and Major Drilling

Assuming the 90 days trading horizon Hemisphere Energy Corp is expected to generate 0.61 times more return on investment than Major Drilling. However, Hemisphere Energy Corp is 1.64 times less risky than Major Drilling. It trades about 0.11 of its potential returns per unit of risk. Major Drilling Group is currently generating about -0.05 per unit of risk. If you would invest  110.00  in Hemisphere Energy Corp on September 3, 2024 and sell it today you would earn a total of  14.00  from holding Hemisphere Energy Corp or generate 12.73% return on investment over 90 days.

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

Hemisphere Energy Corp  vs.  Major Drilling Group

Hemisphere Energy Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hemisphere Energy Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hemisphere Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Major Drilling Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Major Drilling Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Hemisphere Energy and Major Drilling

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

The idea behind Hemisphere Energy Corp and Major Drilling Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .