Correlation Between CDN IMPERIAL and International Business

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

Diversification Opportunities for CDN IMPERIAL and International Business

0.87

Correlation Coefficient

CDN IMPERIAL  International Business

Very poor diversification

The 3 months correlation between CDN and International is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and International Business go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and International Business

Assuming the 90 days trading horizon CDN IMPERIAL is expected to generate 1.49 times less return on investment than International Business. But when comparing it to its historical volatility, CDN IMPERIAL BANK is 1.36 times less risky than International Business. It trades about 0.11 of its potential returns per unit of risk. International Business Machines is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  19,566  in International Business Machines on October 26, 2024 and sell it today you would earn a total of  1,974  from holding International Business Machines or generate 10.09% return on investment over 90 days.

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

CDN IMPERIAL BANK  vs.  International Business Machine

CDN IMPERIAL BANK

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, CDN IMPERIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

International Business

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, International Business may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CDN IMPERIAL and International Business

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

The idea behind CDN IMPERIAL BANK and International Business Machines 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.