Correlation Between Hamilton Australian and Hamilton Canadian

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

By analyzing existing cross correlation between Hamilton Australian Bank and Hamilton Canadian Financials, you can compare the effects of market volatilities on Hamilton Australian and Hamilton Canadian 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 Hamilton Australian with a short position of Hamilton Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hamilton Australian and Hamilton Canadian.

Diversification Opportunities for Hamilton Australian and Hamilton Canadian

0.66

Correlation Coefficient

Hamilton Australian  Hamilton Canadian

Poor diversification

The 3 months correlation between Hamilton and Hamilton is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton Australian Bank and Hamilton Canadian Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Canadian and Hamilton Australian 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 Hamilton Australian Bank are associated (or correlated) with Hamilton Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Canadian has no effect on the direction of Hamilton Australian i.e., Hamilton Australian and Hamilton Canadian go up and down completely randomly.

Pair Corralation between Hamilton Australian and Hamilton Canadian

Assuming the 90 days trading horizon Hamilton Australian Bank is expected to generate 1.82 times more return on investment than Hamilton Canadian. However, Hamilton Australian is 1.82 times more volatile than Hamilton Canadian Financials. It trades about 0.13 of its potential returns per unit of risk. Hamilton Canadian Financials is currently generating about 0.18 per unit of risk. If you would invest  2,296  in Hamilton Australian Bank on October 12, 2024 and sell it today you would earn a total of  599.00  from holding Hamilton Australian Bank or generate 26.09% return on investment over 90 days.

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

Hamilton Australian Bank  vs.  Hamilton Canadian Financials

Hamilton Australian Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Australian Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Hamilton Australian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Hamilton Canadian

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Canadian Financials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Hamilton Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hamilton Australian and Hamilton Canadian

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

The idea behind Hamilton Australian Bank and Hamilton Canadian Financials 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.