Correlation Between Hemisphere Energy and Bengal Energy

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

Diversification Opportunities for Hemisphere Energy and Bengal Energy

0.14

Correlation Coefficient

Hemisphere Energy  Bengal Energy

Average diversification

The 3 months correlation between Hemisphere and Bengal is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy and Bengal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bengal Energy 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 Bengal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bengal Energy has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and Bengal Energy go up and down completely randomly.

Pair Corralation between Hemisphere Energy and Bengal Energy

Assuming the 90 days horizon Hemisphere Energy is expected to generate 0.18 times more return on investment than Bengal Energy. However, Hemisphere Energy is 5.43 times less risky than Bengal Energy. It trades about -0.04 of its potential returns per unit of risk. Bengal Energy is currently generating about -0.02 per unit of risk. If you would invest  133.00  in Hemisphere Energy on December 1, 2024 and sell it today you would lose (6.00) from holding Hemisphere Energy or give up 4.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Hemisphere Energy  vs.  Bengal Energy

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. Despite nearly stable basic indicators, Hemisphere Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bengal Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bengal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Hemisphere Energy and Bengal Energy

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

The idea behind Hemisphere Energy and Bengal Energy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.