Correlation Between Hamilton Beach and IRobot

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

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

Diversification Opportunities for Hamilton Beach and IRobot

-0.71

Correlation Coefficient

Hamilton Beach  IRobot

Pay attention - limited upside

The 3 months correlation between Hamilton and IRobot is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton Beach Brands and iRobot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iRobot and Hamilton Beach 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 Hamilton Beach Brands are associated (or correlated) with IRobot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iRobot has no effect on the direction of Hamilton Beach i.e., Hamilton Beach and IRobot go up and down completely randomly.

Pair Corralation between Hamilton Beach and IRobot

Considering the 90-day investment horizon Hamilton Beach Brands is expected to under-perform the IRobot. But the stock apears to be less risky and, when comparing its historical volatility, Hamilton Beach Brands is 1.54 times less risky than IRobot. The stock trades about -0.13 of its potential returns per unit of risk. The iRobot is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  795.00  in iRobot on January 25, 2024 and sell it today you would lose (106.00) from holding iRobot or give up 13.33% of portfolio value over 90 days.

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

Hamilton Beach Brands  vs.  iRobot

Hamilton Beach Brands

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Beach Brands are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Hamilton Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

iRobot

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hamilton Beach and IRobot

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

The idea behind Hamilton Beach Brands and iRobot 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.

Check out your portfolio center.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.