Correlation Between Hemisphere Energy and VULCAN MATERIALS

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

Diversification Opportunities for Hemisphere Energy and VULCAN MATERIALS

-0.28

Correlation Coefficient

Hemisphere Energy  VULCAN MATERIALS

Very good diversification

The 3 months correlation between Hemisphere and VULCAN is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Energy Corp and VULCAN MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VULCAN MATERIALS 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 VULCAN MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VULCAN MATERIALS has no effect on the direction of Hemisphere Energy i.e., Hemisphere Energy and VULCAN MATERIALS go up and down completely randomly.

Pair Corralation between Hemisphere Energy and VULCAN MATERIALS

Assuming the 90 days trading horizon Hemisphere Energy Corp is expected to under-perform the VULCAN MATERIALS. But the stock apears to be less risky and, when comparing its historical volatility, Hemisphere Energy Corp is 1.75 times less risky than VULCAN MATERIALS. The stock trades about -0.01 of its potential returns per unit of risk. The VULCAN MATERIALS is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  21,560  in VULCAN MATERIALS on October 6, 2024 and sell it today you would earn a total of  3,240  from holding VULCAN MATERIALS or generate 15.03% 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.  VULCAN MATERIALS

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

VULCAN MATERIALS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VULCAN MATERIALS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VULCAN MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hemisphere Energy and VULCAN MATERIALS

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

The idea behind Hemisphere Energy Corp and VULCAN MATERIALS 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 Global Correlations module to find global opportunities by holding instruments from different markets.