Correlation Between Hamilton MidSmall and Hamilton Enhanced

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

Diversification Opportunities for Hamilton MidSmall and Hamilton Enhanced

0.66

Correlation Coefficient

Hamilton MidSmall  Hamilton Enhanced

Poor diversification

The 3 months correlation between Hamilton and Hamilton is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton MidSmall Cap Financia and Hamilton Enhanced Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Enhanced and Hamilton MidSmall 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 MidSmall Cap 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 has no effect on the direction of Hamilton MidSmall i.e., Hamilton MidSmall and Hamilton Enhanced go up and down completely randomly.

Pair Corralation between Hamilton MidSmall and Hamilton Enhanced

Assuming the 90 days trading horizon Hamilton MidSmall Cap Financials is expected to generate 2.95 times more return on investment than Hamilton Enhanced. However, Hamilton MidSmall is 2.95 times more volatile than Hamilton Enhanced Canadian. It trades about 0.07 of its potential returns per unit of risk. Hamilton Enhanced Canadian is currently generating about 0.17 per unit of risk. If you would invest  3,474  in Hamilton MidSmall Cap Financials on October 27, 2024 and sell it today you would earn a total of  221.00  from holding Hamilton MidSmall Cap Financials or generate 6.36% return on investment over 90 days.

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

Hamilton MidSmall Cap Financia  vs.  Hamilton Enhanced Canadian

Hamilton MidSmall Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton MidSmall Cap Financials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Hamilton MidSmall may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hamilton Enhanced

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Enhanced Canadian are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Hamilton Enhanced 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 MidSmall and Hamilton Enhanced

The main advantage of trading using opposite Hamilton MidSmall and Hamilton Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hamilton MidSmall 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 MidSmall Cap Financials and Hamilton Enhanced Canadian 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.