Correlation Between CI Canadian and CI MidCap

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

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

Diversification Opportunities for CI Canadian and CI MidCap

-0.21

Correlation Coefficient

CI Canadian  CI MidCap

Very good diversification

The 3 months correlation between CAGG and UMI is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding CI Canadian Aggregate and CI MidCap Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI MidCap Dividend and CI Canadian 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 CI Canadian Aggregate are associated (or correlated) with CI MidCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI MidCap Dividend has no effect on the direction of CI Canadian i.e., CI Canadian and CI MidCap go up and down completely randomly.

Pair Corralation between CI Canadian and CI MidCap

Assuming the 90 days trading horizon CI Canadian Aggregate is expected to generate 0.42 times more return on investment than CI MidCap. However, CI Canadian Aggregate is 2.38 times less risky than CI MidCap. It trades about 0.07 of its potential returns per unit of risk. CI MidCap Dividend is currently generating about -0.03 per unit of risk. If you would invest  4,431  in CI Canadian Aggregate on December 29, 2024 and sell it today you would earn a total of  79.00  from holding CI Canadian Aggregate or generate 1.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

CI Canadian Aggregate  vs.  CI MidCap Dividend

CI Canadian Aggregate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canadian Aggregate are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CI MidCap Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days CI MidCap Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, CI MidCap is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CI Canadian and CI MidCap

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

The idea behind CI Canadian Aggregate and CI MidCap Dividend 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.