Correlation Between Hemisphere Energy and Check Point

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

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

Diversification Opportunities for Hemisphere Energy and Check Point

0.37

Correlation Coefficient

Hemisphere Energy  Check Point

Weak diversification

The 3 months correlation between Hemisphere and Check is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy Corp and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Corp are associated (or correlated) with Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and Check Point go up and down completely randomly.

Pair Corralation between Hemisphere Energy and Check Point

Assuming the 90 days trading horizon Hemisphere Energy Corp is expected to under-perform the Check Point. But the stock apears to be less risky and, when comparing its historical volatility, Hemisphere Energy Corp is 1.98 times less risky than Check Point. The stock trades about -0.03 of its potential returns per unit of risk. The Check Point Software is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  17,760  in Check Point Software on October 5, 2024 and sell it today you would earn a total of  355.00  from holding Check Point Software or generate 2.0% return on investment over 90 days.

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

Hemisphere Energy Corp  vs.  Check Point Software

Hemisphere Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hemisphere Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hemisphere Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Check Point Software

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Check Point is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hemisphere Energy and Check Point

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

The idea behind Hemisphere Energy Corp and Check Point Software 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.