Correlation Between Hemisphere Energy and LPKF Laser

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

Diversification Opportunities for Hemisphere Energy and LPKF Laser

-0.03

Correlation Coefficient

Hemisphere Energy  LPKF Laser

Good diversification

The 3 months correlation between Hemisphere and LPKF is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy Corp and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics 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 LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and LPKF Laser go up and down completely randomly.

Pair Corralation between Hemisphere Energy and LPKF Laser

Assuming the 90 days trading horizon Hemisphere Energy Corp is expected to generate 0.4 times more return on investment than LPKF Laser. However, Hemisphere Energy Corp is 2.47 times less risky than LPKF Laser. It trades about 0.09 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about 0.01 per unit of risk. If you would invest  113.00  in Hemisphere Energy Corp on September 21, 2024 and sell it today you would earn a total of  8.00  from holding Hemisphere Energy Corp or generate 7.08% 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.  LPKF Laser Electronics

Hemisphere Energy Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hemisphere Energy Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hemisphere Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LPKF Laser Electronics

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Hemisphere Energy and LPKF Laser

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

The idea behind Hemisphere Energy Corp and LPKF Laser Electronics 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 Transaction History module to view history of all your transactions and understand their impact on performance.