Correlation Between Hemisphere Energy and SPoT Coffee

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

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

Diversification Opportunities for Hemisphere Energy and SPoT Coffee

0.0

Correlation Coefficient

Hemisphere Energy  SPoT Coffee

Pay attention - limited upside

The 3 months correlation between Hemisphere and SPoT is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy and SPoT Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPoT Coffee 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 SPoT Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPoT Coffee has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and SPoT Coffee go up and down completely randomly.

Pair Corralation between Hemisphere Energy and SPoT Coffee

Assuming the 90 days horizon Hemisphere Energy is expected to generate 0.2 times more return on investment than SPoT Coffee. However, Hemisphere Energy is 5.04 times less risky than SPoT Coffee. It trades about 0.07 of its potential returns per unit of risk. SPoT Coffee is currently generating about 0.01 per unit of risk. If you would invest  106.00  in Hemisphere Energy on October 7, 2024 and sell it today you would earn a total of  77.00  from holding Hemisphere Energy or generate 72.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Hemisphere Energy  vs.  SPoT Coffee

Hemisphere Energy

Risk-Adjusted Performance

0 of 100

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 recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPoT Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hemisphere Energy and SPoT Coffee

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

The idea behind Hemisphere Energy and SPoT Coffee 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.