Correlation Between Canadian Imperial and Leons Furniture

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

Diversification Opportunities for Canadian Imperial and Leons Furniture

-0.89

Correlation Coefficient

Canadian Imperial  Leons Furniture

Pay attention - limited upside

The 3 months correlation between Canadian and Leons is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture 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 Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Leons Furniture go up and down completely randomly.

Pair Corralation between Canadian Imperial and Leons Furniture

Assuming the 90 days trading horizon Canadian Imperial is expected to generate 1.83 times less return on investment than Leons Furniture. But when comparing it to its historical volatility, Canadian Imperial Bank is 2.96 times less risky than Leons Furniture. It trades about 0.09 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,553  in Leons Furniture Limited on September 19, 2024 and sell it today you would earn a total of  997.00  from holding Leons Furniture Limited or generate 64.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Canadian Imperial Bank  vs.  Leons Furniture Limited

Canadian Imperial Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 12 (%) 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.

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Canadian Imperial and Leons Furniture

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

The idea behind Canadian Imperial Bank and Leons Furniture Limited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.