Correlation Between IShares SPTSX and Hamilton MidSmall

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Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and Hamilton MidSmall 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 MidSmall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SPTSX Capped and Hamilton MidSmall Cap Financials, you can compare the effects of market volatilities on IShares SPTSX and Hamilton MidSmall 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 MidSmall. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and Hamilton MidSmall.

Diversification Opportunities for IShares SPTSX and Hamilton MidSmall

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between IShares and Hamilton is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and Hamilton MidSmall Cap Financia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton MidSmall Cap 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 Capped are associated (or correlated) with Hamilton MidSmall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton MidSmall Cap has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Hamilton MidSmall go up and down completely randomly.

Pair Corralation between IShares SPTSX and Hamilton MidSmall

Assuming the 90 days trading horizon iShares SPTSX Capped is expected to generate 1.54 times more return on investment than Hamilton MidSmall. However, IShares SPTSX is 1.54 times more volatile than Hamilton MidSmall Cap Financials. It trades about 0.02 of its potential returns per unit of risk. Hamilton MidSmall Cap Financials is currently generating about -0.02 per unit of risk. If you would invest  1,752  in iShares SPTSX Capped on September 13, 2024 and sell it today you would earn a total of  7.00  from holding iShares SPTSX Capped or generate 0.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

iShares SPTSX Capped  vs.  Hamilton MidSmall Cap Financia

 Performance 
       Timeline  
iShares SPTSX Capped 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IShares SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Hamilton MidSmall Cap 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton MidSmall Cap Financials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Hamilton MidSmall displayed solid returns over the last few months and may actually be approaching a breakup point.

IShares SPTSX and Hamilton MidSmall Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares SPTSX and Hamilton MidSmall

The main advantage of trading using opposite IShares SPTSX and Hamilton MidSmall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, Hamilton MidSmall 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 MidSmall will offset losses from the drop in Hamilton MidSmall's long position.
The idea behind iShares SPTSX Capped and Hamilton MidSmall 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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