Correlation Between CDN IMPERIAL and Compagnie Plastic

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

Diversification Opportunities for CDN IMPERIAL and Compagnie Plastic

0.4

Correlation Coefficient

CDN IMPERIAL  Compagnie Plastic

Very weak diversification

The 3 months correlation between CDN and Compagnie is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and Compagnie Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Plastic Omnium 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 Compagnie Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Plastic Omnium has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and Compagnie Plastic go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and Compagnie Plastic

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to under-perform the Compagnie Plastic. But the stock apears to be less risky and, when comparing its historical volatility, CDN IMPERIAL BANK is 1.94 times less risky than Compagnie Plastic. The stock trades about -0.06 of its potential returns per unit of risk. The Compagnie Plastic Omnium is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  808.00  in Compagnie Plastic Omnium on September 24, 2024 and sell it today you would earn a total of  164.00  from holding Compagnie Plastic Omnium or generate 20.3% return on investment over 90 days.

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

CDN IMPERIAL BANK  vs.  Compagnie Plastic Omnium

CDN IMPERIAL BANK

Risk-Adjusted Performance

16 of 100

Solid

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 uncertain forward indicators, CDN IMPERIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Compagnie Plastic Omnium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compagnie Plastic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CDN IMPERIAL and Compagnie Plastic

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

The idea behind CDN IMPERIAL BANK and Compagnie Plastic Omnium 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.