Correlation Between HEMISPHERE EGY and ALD SA

Can any of the company-specific risk be diversified away by investing in both HEMISPHERE EGY and ALD SA 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 EGY and ALD SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HEMISPHERE EGY and ALD SA, you can compare the effects of market volatilities on HEMISPHERE EGY and ALD SA 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 EGY with a short position of ALD SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEMISPHERE EGY and ALD SA.

Diversification Opportunities for HEMISPHERE EGY and ALD SA

-0.11

Correlation Coefficient

HEMISPHERE EGY  ALD SA

Good diversification

The 3 months correlation between HEMISPHERE and ALD is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding HEMISPHERE EGY and ALD SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALD SA and HEMISPHERE EGY 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 EGY are associated (or correlated) with ALD SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALD SA has no effect on the direction of HEMISPHERE EGY i.e., HEMISPHERE EGY and ALD SA go up and down completely randomly.

Pair Corralation between HEMISPHERE EGY and ALD SA

Assuming the 90 days trading horizon HEMISPHERE EGY is expected to generate 1.63 times less return on investment than ALD SA. But when comparing it to its historical volatility, HEMISPHERE EGY is 1.96 times less risky than ALD SA. It trades about 0.03 of its potential returns per unit of risk. ALD SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  618.00  in ALD SA on October 15, 2024 and sell it today you would earn a total of  9.00  from holding ALD SA or generate 1.46% return on investment over 90 days.

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

HEMISPHERE EGY  vs.  ALD SA

HEMISPHERE EGY

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HEMISPHERE EGY are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HEMISPHERE EGY is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ALD SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ALD SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ALD SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HEMISPHERE EGY and ALD SA

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

The idea behind HEMISPHERE EGY and ALD SA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.