Correlation Between Hamilton Canadian and Hamilton Energy

Can any of the company-specific risk be diversified away by investing in both Hamilton Canadian and Hamilton 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 Hamilton Canadian and Hamilton Energy 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 Hamilton Energy YIELD, you can compare the effects of market volatilities on Hamilton Canadian and Hamilton 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 Hamilton Canadian with a short position of Hamilton Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hamilton Canadian and Hamilton Energy.

Diversification Opportunities for Hamilton Canadian and Hamilton Energy

0.4

Correlation Coefficient

Hamilton Canadian  Hamilton Energy

Very weak diversification

The 3 months correlation between Hamilton and Hamilton is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton Canadian Bank and Hamilton Energy YIELD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Energy YIELD 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 Hamilton Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Energy YIELD has no effect on the direction of Hamilton Canadian i.e., Hamilton Canadian and Hamilton Energy go up and down completely randomly.

Pair Corralation between Hamilton Canadian and Hamilton Energy

Assuming the 90 days trading horizon Hamilton Canadian Bank is expected to under-perform the Hamilton Energy. But the etf apears to be less risky and, when comparing its historical volatility, Hamilton Canadian Bank is 1.73 times less risky than Hamilton Energy. The etf trades about -0.11 of its potential returns per unit of risk. The Hamilton Energy YIELD is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,413  in Hamilton Energy YIELD on December 22, 2024 and sell it today you would earn a total of  100.00  from holding Hamilton Energy YIELD or generate 7.08% 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.  Hamilton Energy YIELD

Hamilton Canadian Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hamilton Canadian Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Hamilton Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Hamilton Energy YIELD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Energy YIELD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Hamilton Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hamilton Canadian and Hamilton Energy

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

The idea behind Hamilton Canadian Bank and Hamilton Energy YIELD 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.