Correlation Between CDN IMPERIAL and Canon Marketing

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

Diversification Opportunities for CDN IMPERIAL and Canon Marketing

0.7

Correlation Coefficient

CDN IMPERIAL  Canon Marketing

Poor diversification

The 3 months correlation between CDN and Canon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and Canon Marketing Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canon Marketing Japan 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 Canon Marketing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canon Marketing Japan has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and Canon Marketing go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and Canon Marketing

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to generate 0.87 times more return on investment than Canon Marketing. However, CDN IMPERIAL BANK is 1.15 times less risky than Canon Marketing. It trades about -0.06 of its potential returns per unit of risk. Canon Marketing Japan is currently generating about -0.13 per unit of risk. If you would invest  6,162  in CDN IMPERIAL BANK on October 15, 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	Significant
Accuracy	100.0%
Values	Daily Returns

CDN IMPERIAL BANK  vs.  Canon Marketing Japan

CDN IMPERIAL BANK

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, CDN IMPERIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Canon Marketing Japan

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canon Marketing Japan are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canon Marketing is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CDN IMPERIAL and Canon Marketing

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

The idea behind CDN IMPERIAL BANK and Canon Marketing Japan 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.