Correlation Between DOW and Hamilton Beach

By analyzing existing cross correlation between DOW and Hamilton Beach Brands you can compare the effects of market volatilities on DOW and Hamilton Beach 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 DOW with a short position of Hamilton Beach. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOW and Hamilton Beach.

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Can any of the company-specific risk be diversified away by investing in both DOW and Hamilton Beach at the same time? Although using correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combing DOW and Hamilton Beach into the same portfolio which is an essential part of fundamental portfolio management process.

Diversification Opportunities for DOW and Hamilton Beach

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Poor diversification

The 3 months correlation between DOW and Hamilton is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Hamilton Beach Brands Holding in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Beach Brands and DOW 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 DOW are associated (or correlated) with Hamilton Beach. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Beach Brands has no effect on the direction of DOW i.e. DOW and Hamilton Beach go up and down completely randomly.

Pair Corralation between DOW and Hamilton Beach

Given the investment horizon of 30 days, DOW is expected to generate 1.67 times less return on investment than Hamilton Beach. But when comparing it to its historical volatility, DOW is 2.28 times less risky than Hamilton Beach. It trades about 0.07 of its potential returns per unit of risk. Hamilton Beach Brands is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,126  in Hamilton Beach Brands on May 7, 2020 and sell it today you would earn a total of  77.00  from holding Hamilton Beach Brands or generate 6.84% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

DOW  vs.  Hamilton Beach Brands Holding

 Performance (%) 
 Predicted Return Density 
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