Correlation Between CDN IMPERIAL and ARROW ELECTRONICS

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

By analyzing existing cross correlation between CDN IMPERIAL BANK and ARROW ELECTRONICS, you can compare the effects of market volatilities on CDN IMPERIAL and ARROW ELECTRONICS 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 CDN IMPERIAL with a short position of ARROW ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDN IMPERIAL and ARROW ELECTRONICS.

Diversification Opportunities for CDN IMPERIAL and ARROW ELECTRONICS

-0.37

Correlation Coefficient

CDN IMPERIAL  ARROW ELECTRONICS

Very good diversification

The 3 months correlation between CDN and ARROW is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and ARROW ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARROW ELECTRONICS and CDN IMPERIAL 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 CDN IMPERIAL BANK are associated (or correlated) with ARROW ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARROW ELECTRONICS has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and ARROW ELECTRONICS go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and ARROW ELECTRONICS

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to generate 0.35 times more return on investment than ARROW ELECTRONICS. However, CDN IMPERIAL BANK is 2.86 times less risky than ARROW ELECTRONICS. It trades about 0.28 of its potential returns per unit of risk. ARROW ELECTRONICS is currently generating about 0.01 per unit of risk. If you would invest  5,262  in CDN IMPERIAL BANK on September 5, 2024 and sell it today you would earn a total of  788.00  from holding CDN IMPERIAL BANK or generate 14.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

CDN IMPERIAL BANK  vs.  ARROW ELECTRONICS

CDN IMPERIAL BANK

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, CDN IMPERIAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

ARROW ELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARROW ELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ARROW ELECTRONICS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CDN IMPERIAL and ARROW ELECTRONICS

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

The idea behind CDN IMPERIAL BANK and ARROW ELECTRONICS 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.