Correlation Between Alfa Financial and CDN IMPERIAL

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

By analyzing existing cross correlation between Alfa Financial Software and CDN IMPERIAL BANK, you can compare the effects of market volatilities on Alfa Financial and CDN IMPERIAL 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 Alfa Financial with a short position of CDN IMPERIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and CDN IMPERIAL.

Diversification Opportunities for Alfa Financial and CDN IMPERIAL

0.82

Correlation Coefficient

Alfa Financial  CDN IMPERIAL

Very poor diversification

The 3 months correlation between Alfa and CDN is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK and Alfa Financial 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 Alfa Financial Software are associated (or correlated) with CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of Alfa Financial i.e., Alfa Financial and CDN IMPERIAL go up and down completely randomly.

Pair Corralation between Alfa Financial and CDN IMPERIAL

Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 1.74 times more return on investment than CDN IMPERIAL. However, Alfa Financial is 1.74 times more volatile than CDN IMPERIAL BANK. It trades about -0.03 of its potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about -0.07 per unit of risk. If you would invest  254.00  in Alfa Financial Software on September 23, 2024 and sell it today you would lose (4.00) from holding Alfa Financial Software or give up 1.57% of portfolio value over 90 days.

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

Alfa Financial Software  vs.  CDN IMPERIAL BANK

Alfa Financial Software

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CDN IMPERIAL BANK

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, CDN IMPERIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alfa Financial and CDN IMPERIAL

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

The idea behind Alfa Financial Software and CDN IMPERIAL BANK 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.