Correlation Between CI Canadian and Global X

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

By analyzing existing cross correlation between CI Canadian Banks and Global X SPTSX, you can compare the effects of market volatilities on CI Canadian and Global X 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 CI Canadian with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI Canadian and Global X.

Diversification Opportunities for CI Canadian and Global X

0.76

Correlation Coefficient

CI Canadian  Global X

Poor diversification

The 3 months correlation between CIC and Global is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CI Canadian Banks and Global X SPTSX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SPTSX and CI Canadian 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 CI Canadian Banks are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X SPTSX has no effect on the direction of CI Canadian i.e., CI Canadian and Global X go up and down completely randomly.

Pair Corralation between CI Canadian and Global X

Assuming the 90 days trading horizon CI Canadian Banks is expected to under-perform the Global X. But the etf apears to be less risky and, when comparing its historical volatility, CI Canadian Banks is 1.39 times less risky than Global X. The etf trades about -0.06 of its potential returns per unit of risk. The Global X SPTSX is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,461  in Global X SPTSX on December 28, 2024 and sell it today you would lose (68.00) from holding Global X SPTSX or give up 0.8% of portfolio value over 90 days.

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

CI Canadian Banks  vs.  Global X SPTSX

CI Canadian Banks

Risk-Adjusted Performance

Very Weak

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

Global X SPTSX

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X SPTSX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CI Canadian and Global X

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

The idea behind CI Canadian Banks and Global X SPTSX 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.