Correlation Between Hamilton Canadian and Hamilton Enhanced

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

Diversification Opportunities for Hamilton Canadian and Hamilton Enhanced

0.94

Correlation Coefficient

Hamilton Canadian  Hamilton Enhanced

Almost no diversification

The 3 months correlation between Hamilton and Hamilton is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton Canadian Financials and Hamilton Enhanced Covered in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Enhanced Covered 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 Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Enhanced Covered has no effect on the direction of Hamilton Canadian i.e., Hamilton Canadian and Hamilton Enhanced go up and down completely randomly.

Pair Corralation between Hamilton Canadian and Hamilton Enhanced

Assuming the 90 days trading horizon Hamilton Canadian is expected to generate 1.12 times less return on investment than Hamilton Enhanced. But when comparing it to its historical volatility, Hamilton Canadian Financials is 2.01 times less risky than Hamilton Enhanced. It trades about 0.33 of its potential returns per unit of risk. Hamilton Enhanced Covered is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,291  in Hamilton Enhanced Covered on September 5, 2024 and sell it today you would earn a total of  139.00  from holding Hamilton Enhanced Covered or generate 10.77% return on investment over 90 days.

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

Hamilton Canadian Financials  vs.  Hamilton Enhanced Covered

Hamilton Canadian

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Canadian Financials are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Hamilton Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hamilton Enhanced Covered

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Enhanced Covered are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Hamilton Enhanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hamilton Canadian and Hamilton Enhanced

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

The idea behind Hamilton Canadian Financials and Hamilton Enhanced Covered 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.