Correlation Between LANDSEA HOMES and HEMISPHERE EGY

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

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

Diversification Opportunities for LANDSEA HOMES and HEMISPHERE EGY

-0.54

Correlation Coefficient

LANDSEA HOMES  HEMISPHERE EGY

Excellent diversification

The 3 months correlation between LANDSEA and HEMISPHERE is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding LANDSEA HOMES P and HEMISPHERE EGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEMISPHERE EGY and LANDSEA HOMES 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 LANDSEA HOMES P are associated (or correlated) with HEMISPHERE EGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEMISPHERE EGY has no effect on the direction of LANDSEA HOMES i.e., LANDSEA HOMES and HEMISPHERE EGY go up and down completely randomly.

Pair Corralation between LANDSEA HOMES and HEMISPHERE EGY

Assuming the 90 days horizon LANDSEA HOMES P is expected to under-perform the HEMISPHERE EGY. In addition to that, LANDSEA HOMES is 2.17 times more volatile than HEMISPHERE EGY. It trades about -0.02 of its total potential returns per unit of risk. HEMISPHERE EGY is currently generating about 0.15 per unit of volatility. If you would invest  75.00  in HEMISPHERE EGY on September 20, 2024 and sell it today you would earn a total of  51.00  from holding HEMISPHERE EGY or generate 68.0% return on investment over 90 days.

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

LANDSEA HOMES P  vs.  HEMISPHERE EGY

LANDSEA HOMES P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LANDSEA HOMES P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

HEMISPHERE EGY

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEMISPHERE EGY are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HEMISPHERE EGY may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LANDSEA HOMES and HEMISPHERE EGY

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

The idea behind LANDSEA HOMES P and HEMISPHERE EGY 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.