Correlation Between CIBC Active and CIBC Conservative

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

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

Diversification Opportunities for CIBC Active and CIBC Conservative

0.9

Correlation Coefficient

CIBC Active  CIBC Conservative

Almost no diversification

The 3 months correlation between CIBC and CIBC is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding CIBC Active Investment 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 CIBC Active 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 CIBC Active Investment 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 CIBC Active i.e., CIBC Active and CIBC Conservative go up and down completely randomly.

Pair Corralation between CIBC Active and CIBC Conservative

Assuming the 90 days trading horizon CIBC Active is expected to generate 1.37 times less return on investment than CIBC Conservative. In addition to that, CIBC Active is 1.82 times more volatile than CIBC Conservative Fixed. It trades about 0.06 of its total potential returns per unit of risk. CIBC Conservative Fixed is currently generating about 0.14 per unit of volatility. If you would invest  1,809  in CIBC Conservative Fixed on December 20, 2024 and sell it today you would earn a total of  28.00  from holding CIBC Conservative Fixed or generate 1.55% return on investment over 90 days.

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

CIBC Active Investment  vs.  CIBC Conservative Fixed

CIBC Active Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Active Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Active 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Conservative Fixed are ranked lower than 11 (%) 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 CIBC Active and CIBC Conservative

The main advantage of trading using opposite CIBC Active and CIBC Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CIBC Active 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 CIBC Active Investment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.