Correlation Between Canadian Imperial and Diamond Fields

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

Diversification Opportunities for Canadian Imperial and Diamond Fields

-0.49

Correlation Coefficient

Canadian Imperial  Diamond Fields

Very good diversification

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

Pair Corralation between Canadian Imperial and Diamond Fields

Assuming the 90 days trading horizon Canadian Imperial Bank is expected to generate 0.02 times more return on investment than Diamond Fields. However, Canadian Imperial Bank is 64.13 times less risky than Diamond Fields. It trades about 0.27 of its potential returns per unit of risk. Diamond Fields Resources is currently generating about -0.15 per unit of risk. If you would invest  2,519  in Canadian Imperial Bank on September 25, 2024 and sell it today you would earn a total of  28.00  from holding Canadian Imperial Bank or generate 1.11% 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.  Diamond Fields Resources

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.

Diamond Fields Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Fields Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Canadian Imperial and Diamond Fields

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

The idea behind Canadian Imperial Bank and Diamond Fields Resources 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.