Correlation Between PetroShale and Hemisphere Energy

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

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

Diversification Opportunities for PetroShale and Hemisphere Energy

-0.05

Correlation Coefficient

PetroShale  Hemisphere Energy

Good diversification

The 3 months correlation between PetroShale and Hemisphere is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and Hemisphere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemisphere Energy and PetroShale 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 PetroShale are associated (or correlated) with Hemisphere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemisphere Energy has no effect on the direction of PetroShale i.e., PetroShale and Hemisphere Energy go up and down completely randomly.

Pair Corralation between PetroShale and Hemisphere Energy

Assuming the 90 days horizon PetroShale is expected to under-perform the Hemisphere Energy. In addition to that, PetroShale is 1.37 times more volatile than Hemisphere Energy. It trades about -0.2 of its total potential returns per unit of risk. Hemisphere Energy is currently generating about 0.04 per unit of volatility. If you would invest  126.00  in Hemisphere Energy on August 31, 2024 and sell it today you would earn a total of  5.00  from holding Hemisphere Energy or generate 3.97% return on investment over 90 days.

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

PetroShale  vs.  Hemisphere Energy

PetroShale

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroShale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hemisphere Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hemisphere Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hemisphere Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PetroShale and Hemisphere Energy

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

The idea behind PetroShale and Hemisphere Energy 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.