Correlation Between Hemisphere Energy and CVS HEALTH

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

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

Diversification Opportunities for Hemisphere Energy and CVS HEALTH

0.3

Correlation Coefficient

Hemisphere Energy  CVS HEALTH

Weak diversification

The 3 months correlation between Hemisphere and CVS is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR 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 CVS HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH CDR has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and CVS HEALTH go up and down completely randomly.

Pair Corralation between Hemisphere Energy and CVS HEALTH

Assuming the 90 days horizon Hemisphere Energy is expected to generate 0.67 times more return on investment than CVS HEALTH. However, Hemisphere Energy is 1.49 times less risky than CVS HEALTH. It trades about 0.02 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.42 per unit of risk. If you would invest  182.00  in Hemisphere Energy on September 21, 2024 and sell it today you would earn a total of  1.00  from holding Hemisphere Energy or generate 0.55% 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.  CVS HEALTH CDR

Hemisphere Energy

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hemisphere Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hemisphere Energy is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Hemisphere Energy and CVS HEALTH

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

The idea behind Hemisphere Energy and CVS HEALTH CDR 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.