Correlation Between Hemisphere Energy and Africa Energy

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

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

Diversification Opportunities for Hemisphere Energy and Africa Energy

0.29

Correlation Coefficient

Hemisphere Energy  Africa Energy

Modest diversification

The 3 months correlation between Hemisphere and Africa is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy and Africa Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Energy Corp 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 are associated (or correlated) with Africa Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Energy Corp has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and Africa Energy go up and down completely randomly.

Pair Corralation between Hemisphere Energy and Africa Energy

Assuming the 90 days horizon Hemisphere Energy is expected to generate 5.69 times less return on investment than Africa Energy. But when comparing it to its historical volatility, Hemisphere Energy is 2.38 times less risky than Africa Energy. It trades about 0.01 of its potential returns per unit of risk. Africa Energy Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Africa Energy Corp on December 4, 2024 and sell it today you would earn a total of  0.00  from holding Africa Energy Corp or generate 0.0% return on investment over 90 days.

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

Hemisphere Energy  vs.  Africa Energy Corp

Hemisphere Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hemisphere Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hemisphere Energy is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Africa Energy Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Energy Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Africa Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hemisphere Energy and Africa Energy

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

The idea behind Hemisphere Energy and Africa 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..