Correlation Between HEMISPHERE EGY and Zhengzhou Coal

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

By analyzing existing cross correlation between HEMISPHERE EGY and Zhengzhou Coal Mining, you can compare the effects of market volatilities on HEMISPHERE EGY and Zhengzhou Coal 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 Zhengzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEMISPHERE EGY and Zhengzhou Coal.

Diversification Opportunities for HEMISPHERE EGY and Zhengzhou Coal

-0.74

Correlation Coefficient

HEMISPHERE EGY  Zhengzhou Coal

Pay attention - limited upside

The 3 months correlation between HEMISPHERE and Zhengzhou is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding HEMISPHERE EGY and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining 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 Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of HEMISPHERE EGY i.e., HEMISPHERE EGY and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between HEMISPHERE EGY and Zhengzhou Coal

Assuming the 90 days trading horizon HEMISPHERE EGY is expected to under-perform the Zhengzhou Coal. But the stock apears to be less risky and, when comparing its historical volatility, HEMISPHERE EGY is 2.4 times less risky than Zhengzhou Coal. The stock trades about -0.03 of its potential returns per unit of risk. The Zhengzhou Coal Mining is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  125.00  in Zhengzhou Coal Mining on December 24, 2024 and sell it today you would earn a total of  19.00  from holding Zhengzhou Coal Mining or generate 15.2% return on investment over 90 days.

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

HEMISPHERE EGY  vs.  Zhengzhou Coal Mining

HEMISPHERE EGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEMISPHERE EGY has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Zhengzhou Coal Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Coal Mining are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Zhengzhou Coal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEMISPHERE EGY and Zhengzhou Coal

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

The idea behind HEMISPHERE EGY and Zhengzhou Coal Mining 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.