Correlation Between Apple and Canadian Imperial

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

By analyzing existing cross correlation between Apple Inc and Canadian Imperial Bank, you can compare the effects of market volatilities on Apple and Canadian 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 Apple with a short position of Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Canadian Imperial.

Diversification Opportunities for Apple and Canadian Imperial

0.77

Correlation Coefficient

Apple  Canadian Imperial

Poor diversification

The 3 months correlation between Apple and Canadian is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Canadian Imperial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Imperial Bank and Apple 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 Apple Inc are associated (or correlated) with Canadian Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Imperial Bank has no effect on the direction of Apple i.e., Apple and Canadian Imperial go up and down completely randomly.

Pair Corralation between Apple and Canadian Imperial

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.11 times more return on investment than Canadian Imperial. However, Apple is 1.11 times more volatile than Canadian Imperial Bank. It trades about 0.22 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.2 per unit of risk. If you would invest  20,236  in Apple Inc on October 8, 2024 and sell it today you would earn a total of  3,434  from holding Apple Inc or generate 16.97% return on investment over 90 days.

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

Apple Inc  vs.  Canadian Imperial Bank

Apple Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

Canadian Imperial Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Canadian Imperial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Canadian Imperial

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

The idea behind Apple Inc and Canadian 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.