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 Financials 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

0.06

Correlation Coefficient

Hamilton Canadian  Hamilton Energy

Significant diversification

The 3 months correlation between Hamilton and Hamilton is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton Canadian Financials 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 Financials 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 Financials is expected to generate 0.49 times more return on investment than Hamilton Energy. However, Hamilton Canadian Financials is 2.05 times less risky than Hamilton Energy. It trades about 0.18 of its potential returns per unit of risk. Hamilton Energy YIELD is currently generating about -0.04 per unit of risk. If you would invest  1,217  in Hamilton Canadian Financials on October 12, 2024 and sell it today you would earn a total of  248.00  from holding Hamilton Canadian Financials or generate 20.38% return on investment over 90 days.

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

Hamilton Canadian Financials  vs.  Hamilton Energy YIELD

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.

Hamilton Energy YIELD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Energy YIELD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Hamilton Energy 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 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 Financials 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.