Correlation Between Hemisphere Energy and Touchstone Exploration

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

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

Diversification Opportunities for Hemisphere Energy and Touchstone Exploration

-0.21

Correlation Coefficient

Hemisphere Energy  Touchstone Exploration

Very good diversification

The 3 months correlation between Hemisphere and Touchstone is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy and Touchstone Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Exploration 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 Touchstone Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Exploration has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and Touchstone Exploration go up and down completely randomly.

Pair Corralation between Hemisphere Energy and Touchstone Exploration

Assuming the 90 days horizon Hemisphere Energy is expected to generate 0.45 times more return on investment than Touchstone Exploration. However, Hemisphere Energy is 2.23 times less risky than Touchstone Exploration. It trades about 0.07 of its potential returns per unit of risk. Touchstone Exploration is currently generating about -0.02 per unit of risk. If you would invest  109.00  in Hemisphere Energy on September 13, 2024 and sell it today you would earn a total of  78.00  from holding Hemisphere Energy or generate 71.56% return on investment over 90 days.

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

Hemisphere Energy  vs.  Touchstone Exploration

Hemisphere Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hemisphere Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Hemisphere Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Touchstone Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone Exploration 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 Touchstone Exploration

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

The idea behind Hemisphere Energy and Touchstone Exploration 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.