Correlation Between CDN IMPERIAL and Industrial

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

Diversification Opportunities for CDN IMPERIAL and Industrial

0.63

Correlation Coefficient

CDN IMPERIAL  Industrial

Poor diversification

The 3 months correlation between CDN and Industrial is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and Industrial go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and Industrial

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to under-perform the Industrial. But the stock apears to be less risky and, when comparing its historical volatility, CDN IMPERIAL BANK is 2.53 times less risky than Industrial. The stock trades about -0.04 of its potential returns per unit of risk. The Industrial and Commercial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  59.00  in Industrial and Commercial on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Industrial and Commercial or generate 0.0% return on investment over 90 days.

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

CDN IMPERIAL BANK  vs.  Industrial and Commercial

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.

Industrial and Commercial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CDN IMPERIAL and Industrial

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

The idea behind CDN IMPERIAL BANK and Industrial and Commercial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.