Correlation Between CDN IMPERIAL and National Bank

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

Diversification Opportunities for CDN IMPERIAL and National Bank

0.91

Correlation Coefficient

CDN IMPERIAL  National Bank

Almost no diversification

The 3 months correlation between CDN and National is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and National Bank go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and National Bank

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to under-perform the National Bank. But the stock apears to be less risky and, when comparing its historical volatility, CDN IMPERIAL BANK is 1.07 times less risky than National Bank. The stock trades about -0.12 of its potential returns per unit of risk. The National Bank Holdings is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,012  in National Bank Holdings on December 29, 2024 and sell it today you would lose (412.00) from holding National Bank Holdings or give up 10.27% of portfolio value over 90 days.

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

CDN IMPERIAL BANK  vs.  National Bank Holdings

CDN IMPERIAL BANK

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDN IMPERIAL BANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CDN IMPERIAL and National Bank

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

The idea behind CDN IMPERIAL BANK and National Bank Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.