Correlation Between Hemisphere Energy and PHX Energy

Can any of the company-specific risk be diversified away by investing in both Hemisphere Energy and PHX 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 PHX 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 PHX Energy Services, you can compare the effects of market volatilities on Hemisphere Energy and PHX 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 PHX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hemisphere Energy and PHX Energy.

Diversification Opportunities for Hemisphere Energy and PHX Energy

0.15

Correlation Coefficient

Hemisphere Energy  PHX Energy

Average diversification

The 3 months correlation between Hemisphere and PHX is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy and PHX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Energy Services 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 PHX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Energy Services has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and PHX Energy go up and down completely randomly.

Pair Corralation between Hemisphere Energy and PHX Energy

Assuming the 90 days horizon Hemisphere Energy is expected to generate 0.96 times more return on investment than PHX Energy. However, Hemisphere Energy is 1.04 times less risky than PHX Energy. It trades about 0.01 of its potential returns per unit of risk. PHX Energy Services is currently generating about 0.0 per unit of risk. If you would invest  183.00  in Hemisphere Energy on October 20, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hemisphere Energy  vs.  PHX Energy Services

Hemisphere Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hemisphere Energy are ranked lower than 1 (%) 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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

PHX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hemisphere Energy and PHX Energy

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

The idea behind Hemisphere Energy and PHX Energy Services 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.