Correlation Between BMO Canadian and Hamilton Canadian

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

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

Diversification Opportunities for BMO Canadian and Hamilton Canadian

0.63

Correlation Coefficient

BMO Canadian  Hamilton Canadian

Poor diversification

The 3 months correlation between BMO and Hamilton is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding BMO Canadian High and Hamilton Canadian Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Canadian and BMO 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 BMO Canadian High are associated (or correlated) with Hamilton Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Canadian has no effect on the direction of BMO Canadian i.e., BMO Canadian and Hamilton Canadian go up and down completely randomly.

Pair Corralation between BMO Canadian and Hamilton Canadian

Assuming the 90 days trading horizon BMO Canadian High is expected to under-perform the Hamilton Canadian. In addition to that, BMO Canadian is 1.17 times more volatile than Hamilton Canadian Financials. It trades about -0.3 of its total potential returns per unit of risk. Hamilton Canadian Financials is currently generating about -0.11 per unit of volatility. If you would invest  1,472  in Hamilton Canadian Financials on October 3, 2024 and sell it today you would lose (16.00) from holding Hamilton Canadian Financials or give up 1.09% of portfolio value over 90 days.

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

BMO Canadian High  vs.  Hamilton Canadian Financials

BMO Canadian High

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Canadian High are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, BMO Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Hamilton Canadian

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Canadian Financials are ranked lower than 14 (%) 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.

Pair Trading with BMO Canadian and Hamilton Canadian

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

The idea behind BMO Canadian High and Hamilton Canadian 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.