Correlation Between Canadian Imperial and Pan American

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

Diversification Opportunities for Canadian Imperial and Pan American

0.66

Correlation Coefficient

Canadian Imperial  Pan American

Poor diversification

The 3 months correlation between Canadian and Pan is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Pan American go up and down completely randomly.

Pair Corralation between Canadian Imperial and Pan American

Assuming the 90 days trading horizon Canadian Imperial is expected to generate 7.08 times less return on investment than Pan American. But when comparing it to its historical volatility, Canadian Imperial Bank is 9.59 times less risky than Pan American. It trades about 0.16 of its potential returns per unit of risk. Pan American Silver is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,595  in Pan American Silver on September 2, 2024 and sell it today you would earn a total of  511.00  from holding Pan American Silver or generate 19.69% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Pan American Silver

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pan American Silver

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pan American displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Imperial and Pan American

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

The idea behind Canadian Imperial Bank and Pan American Silver 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.