Correlation Between Prairie Provident and Hemisphere Energy
Can any of the company-specific risk be diversified away by investing in both Prairie Provident 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 Prairie Provident and Hemisphere Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prairie Provident Resources and Hemisphere Energy, you can compare the effects of market volatilities on Prairie Provident 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 Prairie Provident with a short position of Hemisphere Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prairie Provident and Hemisphere Energy.
Diversification Opportunities for Prairie Provident and Hemisphere Energy
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Prairie and Hemisphere is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Prairie Provident Resources and Hemisphere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemisphere Energy and Prairie Provident 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 Prairie Provident Resources 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 has no effect on the direction of Prairie Provident i.e., Prairie Provident and Hemisphere Energy go up and down completely randomly.
Pair Corralation between Prairie Provident and Hemisphere Energy
Assuming the 90 days trading horizon Prairie Provident Resources is expected to generate 6.7 times more return on investment than Hemisphere Energy. However, Prairie Provident is 6.7 times more volatile than Hemisphere Energy. It trades about 0.07 of its potential returns per unit of risk. Hemisphere Energy is currently generating about 0.07 per unit of risk. If you would invest 3.00 in Prairie Provident Resources on September 4, 2024 and sell it today you would earn a total of 0.50 from holding Prairie Provident Resources or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.81% |
| Values | Daily Returns |
Prairie Provident Resources vs. Hemisphere Energy
Performance |
| Timeline |
| Prairie Provident |
| Hemisphere Energy |
Prairie Provident and Hemisphere Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prairie Provident and Hemisphere Energy
The main advantage of trading using opposite Prairie Provident and Hemisphere Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prairie Provident 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.| Prairie Provident vs. Pine Cliff Energy | Prairie Provident vs. InPlay Oil Corp | Prairie Provident vs. Journey Energy |
| Hemisphere Energy vs. InPlay Oil Corp | Hemisphere Energy vs. Pine Cliff Energy | Hemisphere Energy vs. Journey Energy | Hemisphere Energy vs. Yangarra Resources |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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