Correlation Between Hammond Manufacturing and Omni Lite

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

By analyzing existing cross correlation between Hammond Manufacturing and Omni Lite Industries Canada, you can compare the effects of market volatilities on Hammond Manufacturing and Omni Lite 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 Hammond Manufacturing with a short position of Omni Lite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hammond Manufacturing and Omni Lite.

Diversification Opportunities for Hammond Manufacturing and Omni Lite

-0.57

Correlation Coefficient

Hammond Manufacturing  Omni Lite

Excellent diversification

The 3 months correlation between Hammond and Omni is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hammond Manufacturing and Omni Lite Industries Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omni Lite Industries and Hammond Manufacturing 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 Hammond Manufacturing are associated (or correlated) with Omni Lite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omni Lite Industries has no effect on the direction of Hammond Manufacturing i.e., Hammond Manufacturing and Omni Lite go up and down completely randomly.

Pair Corralation between Hammond Manufacturing and Omni Lite

Assuming the 90 days trading horizon Hammond Manufacturing is expected to under-perform the Omni Lite. In addition to that, Hammond Manufacturing is 1.07 times more volatile than Omni Lite Industries Canada. It trades about -0.18 of its total potential returns per unit of risk. Omni Lite Industries Canada is currently generating about 0.01 per unit of volatility. If you would invest  110.00  in Omni Lite Industries Canada on April 2, 2024 and sell it today you would earn a total of  0.00  from holding Omni Lite Industries Canada or generate 0.0% return on investment over 90 days.

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

Hammond Manufacturing  vs.  Omni Lite Industries Canada

Hammond Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hammond Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in August 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Omni Lite Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Omni Lite Industries Canada are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Omni Lite showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hammond Manufacturing and Omni Lite

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

The idea behind Hammond Manufacturing and Omni Lite Industries Canada 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.