Correlation Between Hamilton Canadian and BMO Canadian

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

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

Diversification Opportunities for Hamilton Canadian and BMO Canadian

0.52

Correlation Coefficient

Hamilton Canadian  BMO Canadian

Very weak diversification

The 3 months correlation between Hamilton and BMO is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton Canadian Bank and BMO Canadian Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Canadian Dividend and Hamilton Canadian 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 Canadian Bank are associated (or correlated) with BMO Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Canadian Dividend has no effect on the direction of Hamilton Canadian i.e., Hamilton Canadian and BMO Canadian go up and down completely randomly.

Pair Corralation between Hamilton Canadian and BMO Canadian

Assuming the 90 days trading horizon Hamilton Canadian is expected to generate 2.06 times less return on investment than BMO Canadian. In addition to that, Hamilton Canadian is 1.45 times more volatile than BMO Canadian Dividend. It trades about 0.04 of its total potential returns per unit of risk. BMO Canadian Dividend is currently generating about 0.11 per unit of volatility. If you would invest  2,168  in BMO Canadian Dividend on December 29, 2024 and sell it today you would earn a total of  80.00  from holding BMO Canadian Dividend or generate 3.69% return on investment over 90 days.

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

Hamilton Canadian Bank  vs.  BMO Canadian Dividend

Hamilton Canadian Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Canadian Bank are ranked lower than 2 (%) 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.

BMO Canadian Dividend

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Canadian Dividend are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO 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 Canadian and BMO Canadian

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

The idea behind Hamilton Canadian Bank and BMO Canadian Dividend 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.