Correlation Between CIBC Active and CI Preferred

Can any of the company-specific risk be diversified away by investing in both CIBC Active and CI Preferred 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 CI Preferred 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 CI Preferred Share, you can compare the effects of market volatilities on CIBC Active and CI Preferred 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 CI Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of CIBC Active and CI Preferred.

Diversification Opportunities for CIBC Active and CI Preferred

0.78

Correlation Coefficient

CIBC Active  CI Preferred

Poor diversification

The 3 months correlation between CIBC and FPR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CIBC Active Investment and CI Preferred Share in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Preferred Share 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 CI Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Preferred Share has no effect on the direction of CIBC Active i.e., CIBC Active and CI Preferred go up and down completely randomly.

Pair Corralation between CIBC Active and CI Preferred

Assuming the 90 days trading horizon CIBC Active is expected to generate 17.03 times less return on investment than CI Preferred. But when comparing it to its historical volatility, CIBC Active Investment is 3.81 times less risky than CI Preferred. It trades about 0.13 of its potential returns per unit of risk. CI Preferred Share is currently generating about 0.59 of returns per unit of risk over similar time horizon. If you would invest  2,284  in CI Preferred Share on October 26, 2024 and sell it today you would earn a total of  100.00  from holding CI Preferred Share or generate 4.38% return on investment over 90 days.

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

CIBC Active Investment  vs.  CI Preferred Share

CIBC Active Investment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Active Investment are ranked lower than 14 (%) 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.

CI Preferred Share

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Preferred Share are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Preferred is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CIBC Active and CI Preferred

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

The idea behind CIBC Active Investment and CI Preferred Share 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.