Correlation Between Canadian Imperial and Broadcom

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

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

Diversification Opportunities for Canadian Imperial and Broadcom

0.27

Correlation Coefficient

Canadian Imperial  Broadcom

Modest diversification

The 3 months correlation between Canadian and Broadcom is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and Canadian 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 Canadian Imperial Bank are associated (or correlated) with Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Broadcom go up and down completely randomly.

Pair Corralation between Canadian Imperial and Broadcom

Assuming the 90 days trading horizon Canadian Imperial is expected to generate 4.66 times less return on investment than Broadcom. But when comparing it to its historical volatility, Canadian Imperial Bank is 9.05 times less risky than Broadcom. It trades about 0.13 of its potential returns per unit of risk. Broadcom is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,668  in Broadcom on September 5, 2024 and sell it today you would earn a total of  352.00  from holding Broadcom or generate 9.6% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Broadcom

Canadian Imperial Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Canadian Imperial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Broadcom

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Broadcom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Canadian Imperial and Broadcom

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

The idea behind Canadian Imperial Bank and Broadcom 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.