Correlation Between VULCAN MATERIALS and Hemisphere Energy

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

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

Diversification Opportunities for VULCAN MATERIALS and Hemisphere Energy

-0.28

Correlation Coefficient

VULCAN MATERIALS  Hemisphere Energy

Very good diversification

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

Pair Corralation between VULCAN MATERIALS and Hemisphere Energy

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 2.05 times less return on investment than Hemisphere Energy. But when comparing it to its historical volatility, VULCAN MATERIALS is 1.06 times less risky than Hemisphere Energy. It trades about 0.05 of its potential returns per unit of risk. Hemisphere Energy Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Hemisphere Energy Corp on October 6, 2024 and sell it today you would earn a total of  48.00  from holding Hemisphere Energy Corp or generate 65.75% return on investment over 90 days.

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

VULCAN MATERIALS  vs.  Hemisphere Energy Corp

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.

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.

Pair Trading with VULCAN MATERIALS and Hemisphere Energy

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

The idea behind VULCAN MATERIALS and Hemisphere Energy Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.