Correlation Between Brompton Flaherty and CIBC Conservative

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

By analyzing existing cross correlation between Brompton Flaherty Crumrine and CIBC Conservative Fixed, you can compare the effects of market volatilities on Brompton Flaherty and CIBC Conservative 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 Brompton Flaherty with a short position of CIBC Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton Flaherty and CIBC Conservative.

Diversification Opportunities for Brompton Flaherty and CIBC Conservative

0.53

Correlation Coefficient

Brompton Flaherty  CIBC Conservative

Very weak diversification

The 3 months correlation between Brompton and CIBC is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Flaherty Crumrine and CIBC Conservative Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Conservative Fixed and Brompton Flaherty 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 Brompton Flaherty Crumrine are associated (or correlated) with CIBC Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Conservative Fixed has no effect on the direction of Brompton Flaherty i.e., Brompton Flaherty and CIBC Conservative go up and down completely randomly.

Pair Corralation between Brompton Flaherty and CIBC Conservative

Assuming the 90 days trading horizon Brompton Flaherty Crumrine is expected to generate 1.98 times more return on investment than CIBC Conservative. However, Brompton Flaherty is 1.98 times more volatile than CIBC Conservative Fixed. It trades about 0.05 of its potential returns per unit of risk. CIBC Conservative Fixed is currently generating about 0.08 per unit of risk. If you would invest  2,041  in Brompton Flaherty Crumrine on October 26, 2024 and sell it today you would earn a total of  256.00  from holding Brompton Flaherty Crumrine or generate 12.54% return on investment over 90 days.

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

Brompton Flaherty Crumrine  vs.  CIBC Conservative Fixed

Brompton Flaherty

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Flaherty Crumrine are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brompton Flaherty is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CIBC Conservative Fixed

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Conservative Fixed are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Conservative is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brompton Flaherty and CIBC Conservative

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

The idea behind Brompton Flaherty Crumrine and CIBC Conservative Fixed 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.