Correlation Between CDN IMPERIAL and Bank of America

Can any of the company-specific risk be diversified away by investing in both CDN IMPERIAL and Bank of America 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 Bank of America 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 Verizon Communications, you can compare the effects of market volatilities on CDN IMPERIAL and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDN IMPERIAL and Bank of America.

Diversification Opportunities for CDN IMPERIAL and Bank of America

0.19

Correlation Coefficient

CDN IMPERIAL  Bank of America

Average diversification

The 3 months correlation between CDN and Bank is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and Bank of America go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and Bank of America

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to generate 0.91 times more return on investment than Bank of America. However, CDN IMPERIAL BANK is 1.1 times less risky than Bank of America. It trades about -0.05 of its potential returns per unit of risk. Verizon Communications is currently generating about -0.28 per unit of risk. If you would invest  6,139  in CDN IMPERIAL BANK on October 10, 2024 and sell it today you would lose (72.00) from holding CDN IMPERIAL BANK or give up 1.17% of portfolio value over 90 days.

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

CDN IMPERIAL BANK  vs.  Verizon Communications

CDN IMPERIAL BANK

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, CDN IMPERIAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CDN IMPERIAL and Bank of America

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

The idea behind CDN IMPERIAL BANK and Verizon Communications 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..