Correlation Between BMO Covered and Hamilton Mid

Can any of the company-specific risk be diversified away by investing in both BMO Covered and Hamilton Mid 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 BMO Covered and Hamilton Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BMO Covered Call and Hamilton Mid Cap Financials, you can compare the effects of market volatilities on BMO Covered and Hamilton Mid 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 BMO Covered with a short position of Hamilton Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Covered and Hamilton Mid.

Diversification Opportunities for BMO Covered and Hamilton Mid

0.82

Correlation Coefficient

BMO Covered  Hamilton Mid

Very poor diversification

The 3 months correlation between BMO and Hamilton is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BMO Covered Call and Hamilton Mid Cap Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Mid Cap and BMO Covered 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 BMO Covered Call are associated (or correlated) with Hamilton Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Mid Cap has no effect on the direction of BMO Covered i.e., BMO Covered and Hamilton Mid go up and down completely randomly.

Pair Corralation between BMO Covered and Hamilton Mid

Assuming the 90 days trading horizon BMO Covered Call is expected to under-perform the Hamilton Mid. But the etf apears to be less risky and, when comparing its historical volatility, BMO Covered Call is 1.67 times less risky than Hamilton Mid. The etf trades about -0.1 of its potential returns per unit of risk. The Hamilton Mid Cap Financials is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,566  in Hamilton Mid Cap Financials on December 30, 2024 and sell it today you would lose (39.00) from holding Hamilton Mid Cap Financials or give up 1.09% of portfolio value over 90 days.

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

BMO Covered Call  vs.  Hamilton Mid Cap Financials

BMO Covered Call

Risk-Adjusted Performance

Very Weak

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

Hamilton Mid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BMO Covered and Hamilton Mid

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

The idea behind BMO Covered Call and Hamilton Mid Cap Financials 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.