Correlation Between CDSPI Canadian and CI Gold

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

By analyzing existing cross correlation between CDSPI Canadian Equity and CI Gold Bullion, you can compare the effects of market volatilities on CDSPI Canadian and CI Gold 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 CDSPI Canadian with a short position of CI Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDSPI Canadian and CI Gold.

Diversification Opportunities for CDSPI Canadian and CI Gold

-0.19

Correlation Coefficient

CDSPI Canadian  CI Gold

Good diversification

The 3 months correlation between CDSPI and VALT-B is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding CDSPI Canadian Equity and CI Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Gold Bullion and CDSPI Canadian 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 CDSPI Canadian Equity are associated (or correlated) with CI Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Gold Bullion has no effect on the direction of CDSPI Canadian i.e., CDSPI Canadian and CI Gold go up and down completely randomly.

Pair Corralation between CDSPI Canadian and CI Gold

Assuming the 90 days trading horizon CDSPI Canadian Equity is expected to under-perform the CI Gold. But the fund apears to be less risky and, when comparing its historical volatility, CDSPI Canadian Equity is 1.03 times less risky than CI Gold. The fund trades about -0.05 of its potential returns per unit of risk. The CI Gold Bullion is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  3,745  in CI Gold Bullion on December 25, 2024 and sell it today you would earn a total of  551.00  from holding CI Gold Bullion or generate 14.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

CDSPI Canadian Equity  vs.  CI Gold Bullion

CDSPI Canadian Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDSPI Canadian Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, CDSPI Canadian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CI Gold Bullion

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Gold Bullion are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating essential indicators, CI Gold sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CDSPI Canadian and CI Gold

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

The idea behind CDSPI Canadian Equity and CI Gold Bullion 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.