Correlation Between CDN IMPERIAL and VOLKSWAGEN ADR

Can any of the company-specific risk be diversified away by investing in both CDN IMPERIAL and VOLKSWAGEN ADR 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 VOLKSWAGEN ADR 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 VOLKSWAGEN ADR 110ON, you can compare the effects of market volatilities on CDN IMPERIAL and VOLKSWAGEN ADR 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 VOLKSWAGEN ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDN IMPERIAL and VOLKSWAGEN ADR.

Diversification Opportunities for CDN IMPERIAL and VOLKSWAGEN ADR

-0.6

Correlation Coefficient

CDN IMPERIAL  VOLKSWAGEN ADR

Excellent diversification

The 3 months correlation between CDN and VOLKSWAGEN is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and VOLKSWAGEN ADR 110ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOLKSWAGEN ADR 110ON 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 VOLKSWAGEN ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOLKSWAGEN ADR 110ON has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and VOLKSWAGEN ADR go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and VOLKSWAGEN ADR

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to generate 0.5 times more return on investment than VOLKSWAGEN ADR. However, CDN IMPERIAL BANK is 2.0 times less risky than VOLKSWAGEN ADR. It trades about 0.2 of its potential returns per unit of risk. VOLKSWAGEN ADR 110ON is currently generating about -0.05 per unit of risk. If you would invest  5,390  in CDN IMPERIAL BANK on October 9, 2024 and sell it today you would earn a total of  694.00  from holding CDN IMPERIAL BANK or generate 12.88% return on investment over 90 days.

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

CDN IMPERIAL BANK  vs.  VOLKSWAGEN ADR 110ON

CDN IMPERIAL BANK

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, CDN IMPERIAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

VOLKSWAGEN ADR 110ON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VOLKSWAGEN ADR 110ON has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 VOLKSWAGEN ADR

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

The idea behind CDN IMPERIAL BANK and VOLKSWAGEN ADR 110ON 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.