Correlation Between Hamilton Canadian and Hamilton Equity

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

Diversification Opportunities for Hamilton Canadian and Hamilton Equity

0.78

Correlation Coefficient

Hamilton Canadian  Hamilton Equity

Poor diversification

The 3 months correlation between Hamilton and Hamilton is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton Canadian Bank and Hamilton Equity YIELD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Equity 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 Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Equity YIELD has no effect on the direction of Hamilton Canadian i.e., Hamilton Canadian and Hamilton Equity go up and down completely randomly.

Pair Corralation between Hamilton Canadian and Hamilton Equity

Assuming the 90 days trading horizon Hamilton Canadian Bank is expected to generate 0.73 times more return on investment than Hamilton Equity. However, Hamilton Canadian Bank is 1.38 times less risky than Hamilton Equity. It trades about -0.11 of its potential returns per unit of risk. Hamilton Equity YIELD is currently generating about -0.09 per unit of risk. If you would invest  1,964  in Hamilton Canadian Bank on December 22, 2024 and sell it today you would lose (96.00) from holding Hamilton Canadian Bank or give up 4.89% of portfolio value over 90 days.

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

Hamilton Canadian Bank  vs.  Hamilton Equity 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 Equity YIELD

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hamilton Equity YIELD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Hamilton Equity 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 Hamilton Equity

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

The idea behind Hamilton Canadian Bank and Hamilton Equity 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..