Correlation Between CDN IMPERIAL and Paramount Gold

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

Diversification Opportunities for CDN IMPERIAL and Paramount Gold

0.23

Correlation Coefficient

CDN IMPERIAL  Paramount Gold

Modest diversification

The 3 months correlation between CDN and Paramount is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and Paramount Gold Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Gold Nevada 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 Paramount Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Gold Nevada has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and Paramount Gold go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and Paramount Gold

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to under-perform the Paramount Gold. But the stock apears to be less risky and, when comparing its historical volatility, CDN IMPERIAL BANK is 2.45 times less risky than Paramount Gold. The stock trades about -0.15 of its potential returns per unit of risk. The Paramount Gold Nevada is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Paramount Gold Nevada on December 21, 2024 and sell it today you would earn a total of  1.00  from holding Paramount Gold Nevada or generate 3.13% 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.  Paramount Gold Nevada

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 fragile performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Paramount Gold Nevada

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Gold Nevada are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Paramount Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CDN IMPERIAL and Paramount Gold

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

The idea behind CDN IMPERIAL BANK and Paramount Gold Nevada 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.