Correlation Between Hemisphere Energy and JAPAN TOBACCO

Can any of the company-specific risk be diversified away by investing in both Hemisphere Energy and JAPAN TOBACCO 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 JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on Hemisphere Energy and JAPAN TOBACCO 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 JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hemisphere Energy and JAPAN TOBACCO.

Diversification Opportunities for Hemisphere Energy and JAPAN TOBACCO

-0.17

Correlation Coefficient

Hemisphere Energy  JAPAN TOBACCO

Good diversification

The 3 months correlation between Hemisphere and JAPAN is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy Corp and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and JAPAN TOBACCO go up and down completely randomly.

Pair Corralation between Hemisphere Energy and JAPAN TOBACCO

Assuming the 90 days trading horizon Hemisphere Energy Corp is expected to generate 1.25 times more return on investment than JAPAN TOBACCO. However, Hemisphere Energy is 1.25 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.01 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about -0.16 per unit of risk. If you would invest  121.00  in Hemisphere Energy Corp on December 1, 2024 and sell it today you would earn a total of  0.00  from holding Hemisphere Energy Corp or generate 0.0% return on investment over 90 days.

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

Hemisphere Energy Corp  vs.  JAPAN TOBACCO UNSPADR12

Hemisphere Energy Corp

Risk-Adjusted Performance

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.

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

Very Weak

Over the last 90 days JAPAN TOBACCO UNSPADR12 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic 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 JAPAN TOBACCO

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

The idea behind Hemisphere Energy Corp and JAPAN TOBACCO UNSPADR12 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.