Correlation Between CIBC Clean and CIBC Equity

Can any of the company-specific risk be diversified away by investing in both CIBC Clean and CIBC Equity 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 CIBC Clean and CIBC Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CIBC Clean Energy and CIBC Equity Index, you can compare the effects of market volatilities on CIBC Clean and CIBC Equity 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 CIBC Clean with a short position of CIBC Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of CIBC Clean and CIBC Equity.

Diversification Opportunities for CIBC Clean and CIBC Equity

0.52

Correlation Coefficient

CIBC Clean  CIBC Equity

Very weak diversification

The 3 months correlation between CIBC and CIBC is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CIBC Clean Energy and CIBC Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Equity Index and CIBC Clean 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 CIBC Clean Energy are associated (or correlated) with CIBC Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Equity Index has no effect on the direction of CIBC Clean i.e., CIBC Clean and CIBC Equity go up and down completely randomly.

Pair Corralation between CIBC Clean and CIBC Equity

Assuming the 90 days trading horizon CIBC Clean Energy is expected to under-perform the CIBC Equity. In addition to that, CIBC Clean is 1.48 times more volatile than CIBC Equity Index. It trades about -0.09 of its total potential returns per unit of risk. CIBC Equity Index is currently generating about -0.09 per unit of volatility. If you would invest  3,383  in CIBC Equity Index on December 21, 2024 and sell it today you would lose (178.00) from holding CIBC Equity Index or give up 5.26% of portfolio value over 90 days.

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

CIBC Clean Energy  vs.  CIBC Equity Index

CIBC Clean Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days CIBC Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

CIBC Equity Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days CIBC Equity Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CIBC Equity is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CIBC Clean and CIBC Equity

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

The idea behind CIBC Clean Energy and CIBC Equity Index 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.