Correlation Between IShares SPTSX and Hamilton Canadian

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

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

Diversification Opportunities for IShares SPTSX and Hamilton Canadian

-0.51

Correlation Coefficient

IShares SPTSX  Hamilton Canadian

Excellent diversification

The 3 months correlation between IShares and Hamilton is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Global and Hamilton Canadian Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Canadian and IShares SPTSX 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 iShares SPTSX Global 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 IShares SPTSX i.e., IShares SPTSX and Hamilton Canadian go up and down completely randomly.

Pair Corralation between IShares SPTSX and Hamilton Canadian

Assuming the 90 days trading horizon iShares SPTSX Global is expected to under-perform the Hamilton Canadian. In addition to that, IShares SPTSX is 4.26 times more volatile than Hamilton Canadian Financials. It trades about -0.03 of its total potential returns per unit of risk. Hamilton Canadian Financials is currently generating about 0.25 per unit of volatility. If you would invest  1,390  in Hamilton Canadian Financials on September 16, 2024 and sell it today you would earn a total of  95.00  from holding Hamilton Canadian Financials or generate 6.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares SPTSX Global  vs.  Hamilton Canadian Financials

iShares SPTSX Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SPTSX Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, IShares SPTSX 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

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Canadian Financials are ranked lower than 19 (%) 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 IShares SPTSX and Hamilton Canadian

The main advantage of trading using opposite IShares SPTSX and Hamilton Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX 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 iShares SPTSX Global 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.