Correlation Between Hemisphere Energy and Pentair Plc

Can any of the company-specific risk be diversified away by investing in both Hemisphere Energy and Pentair Plc 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 Pentair Plc 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 Pentair plc, you can compare the effects of market volatilities on Hemisphere Energy and Pentair Plc 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 Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hemisphere Energy and Pentair Plc.

Diversification Opportunities for Hemisphere Energy and Pentair Plc

0.64

Correlation Coefficient

Hemisphere Energy  Pentair Plc

Poor diversification

The 3 months correlation between Hemisphere and Pentair is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy Corp and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc 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 Pentair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair plc has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and Pentair Plc go up and down completely randomly.

Pair Corralation between Hemisphere Energy and Pentair Plc

Assuming the 90 days trading horizon Hemisphere Energy is expected to generate 2.01 times less return on investment than Pentair Plc. In addition to that, Hemisphere Energy is 1.44 times more volatile than Pentair plc. It trades about 0.11 of its total potential returns per unit of risk. Pentair plc is currently generating about 0.32 per unit of volatility. If you would invest  7,980  in Pentair plc on September 3, 2024 and sell it today you would earn a total of  2,335  from holding Pentair plc or generate 29.26% return on investment over 90 days.

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

Hemisphere Energy Corp  vs.  Pentair plc

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.

Pentair plc

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pentair Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hemisphere Energy and Pentair Plc

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

The idea behind Hemisphere Energy Corp and Pentair plc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.