Correlation Between Visa and Hamilton Canadian

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

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

Diversification Opportunities for Visa and Hamilton Canadian

0.8

Correlation Coefficient

Visa  Hamilton Canadian

Very poor diversification

The 3 months correlation between Visa and Hamilton is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hamilton Canadian Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Canadian and Visa 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 Visa Class A 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 Visa i.e., Visa and Hamilton Canadian go up and down completely randomly.

Pair Corralation between Visa and Hamilton Canadian

Taking into account the 90-day investment horizon Visa Class A is expected to generate 2.9 times more return on investment than Hamilton Canadian. However, Visa is 2.9 times more volatile than Hamilton Canadian Financials. It trades about 0.16 of its potential returns per unit of risk. Hamilton Canadian Financials is currently generating about 0.37 per unit of risk. If you would invest  27,801  in Visa Class A on September 3, 2024 and sell it today you would earn a total of  3,707  from holding Visa Class A or generate 13.33% return on investment over 90 days.

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

Visa Class A  vs.  Hamilton Canadian Financials

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Hamilton Canadian

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Canadian Financials are ranked lower than 28 (%) 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.

Pair Trading with Visa and Hamilton Canadian

The main advantage of trading using opposite Visa and Hamilton Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.