Correlation Between Volkswagen and Hemisphere Energy

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

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

Diversification Opportunities for Volkswagen and Hemisphere Energy

-0.32

Correlation Coefficient

Volkswagen  Hemisphere Energy

Very good diversification

The 3 months correlation between Volkswagen and Hemisphere is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Hemisphere Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemisphere Energy Corp and Volkswagen 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 Volkswagen AG 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 Corp has no effect on the direction of Volkswagen i.e., Volkswagen and Hemisphere Energy go up and down completely randomly.

Pair Corralation between Volkswagen and Hemisphere Energy

Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the Hemisphere Energy. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.09 times less risky than Hemisphere Energy. The stock trades about -0.16 of its potential returns per unit of risk. The Hemisphere Energy Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  112.00  in Hemisphere Energy Corp on September 4, 2024 and sell it today you would earn a total of  12.00  from holding Hemisphere Energy Corp or generate 10.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Volkswagen AG  vs.  Hemisphere Energy Corp

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hemisphere Energy Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hemisphere Energy Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hemisphere Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Volkswagen and Hemisphere Energy

The main advantage of trading using opposite Volkswagen and Hemisphere Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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 Volkswagen AG and Hemisphere Energy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..