Correlation Between Hamilton Canadian and IShares ESG

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

Diversification Opportunities for Hamilton Canadian and IShares ESG

0.96

Correlation Coefficient

Hamilton Canadian  IShares ESG

Almost no diversification

The 3 months correlation between Hamilton and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton Canadian Financials and iShares ESG Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Growth 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Growth has no effect on the direction of Hamilton Canadian i.e., Hamilton Canadian and IShares ESG go up and down completely randomly.

Pair Corralation between Hamilton Canadian and IShares ESG

Assuming the 90 days trading horizon Hamilton Canadian is expected to generate 1.03 times less return on investment than IShares ESG. But when comparing it to its historical volatility, Hamilton Canadian Financials is 1.2 times less risky than IShares ESG. It trades about 0.26 of its potential returns per unit of risk. iShares ESG Growth is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,518  in iShares ESG Growth on September 14, 2024 and sell it today you would earn a total of  396.00  from holding iShares ESG Growth or generate 7.18% 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.  iShares ESG Growth

Hamilton Canadian

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Canadian Financials are ranked lower than 20 (%) 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.

iShares ESG Growth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Growth are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hamilton Canadian and IShares ESG

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

The idea behind Hamilton Canadian Financials and iShares ESG Growth 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..