Correlation Between Canadian Imperial and Computer Modelling

Can any of the company-specific risk be diversified away by investing in both Canadian Imperial and Computer Modelling 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 Computer Modelling 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 Computer Modelling Group, you can compare the effects of market volatilities on Canadian Imperial and Computer Modelling 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 Computer Modelling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Imperial and Computer Modelling.

Diversification Opportunities for Canadian Imperial and Computer Modelling

-0.49

Correlation Coefficient

Canadian Imperial  Computer Modelling

Very good diversification

The 3 months correlation between Canadian and Computer is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Computer Modelling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Modelling 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 Computer Modelling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Modelling has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Computer Modelling go up and down completely randomly.

Pair Corralation between Canadian Imperial and Computer Modelling

Assuming the 90 days trading horizon Canadian Imperial is expected to generate 2.63 times less return on investment than Computer Modelling. But when comparing it to its historical volatility, Canadian Imperial Bank is 3.45 times less risky than Computer Modelling. It trades about 0.09 of its potential returns per unit of risk. Computer Modelling Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  536.00  in Computer Modelling Group on September 21, 2024 and sell it today you would earn a total of  531.00  from holding Computer Modelling Group or generate 99.07% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Computer Modelling Group

Canadian Imperial Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 15 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Computer Modelling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Canadian Imperial and Computer Modelling

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

The idea behind Canadian Imperial Bank and Computer Modelling Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.