Correlation Between CDN IMPERIAL and ValOre Metals

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

Diversification Opportunities for CDN IMPERIAL and ValOre Metals

0.21

Correlation Coefficient

CDN IMPERIAL  ValOre Metals

Modest diversification

The 3 months correlation between CDN and ValOre is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and ValOre Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ValOre Metals Corp 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 ValOre Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ValOre Metals Corp has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and ValOre Metals go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and ValOre Metals

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to under-perform the ValOre Metals. But the stock apears to be less risky and, when comparing its historical volatility, CDN IMPERIAL BANK is 11.23 times less risky than ValOre Metals. The stock trades about -0.01 of its potential returns per unit of risk. The ValOre Metals Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4.10  in ValOre Metals Corp on September 27, 2024 and sell it today you would earn a total of  2.40  from holding ValOre Metals Corp or generate 58.54% return on investment over 90 days.

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

CDN IMPERIAL BANK  vs.  ValOre Metals Corp

CDN IMPERIAL BANK

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 14 (%) 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 January 2025.

ValOre Metals Corp

Risk-Adjusted Performance

9 of 100

Good

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

Pair Trading with CDN IMPERIAL and ValOre Metals

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

The idea behind CDN IMPERIAL BANK and ValOre Metals Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.