Correlation Between Canadian Imperial and South Pacific

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

Diversification Opportunities for Canadian Imperial and South Pacific

-0.17

Correlation Coefficient

Canadian Imperial  South Pacific

Good diversification

The 3 months correlation between Canadian and South is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and South Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Pacific Metals 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 South Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Pacific Metals has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and South Pacific go up and down completely randomly.

Pair Corralation between Canadian Imperial and South Pacific

Assuming the 90 days trading horizon Canadian Imperial is expected to generate 8.91 times less return on investment than South Pacific. But when comparing it to its historical volatility, Canadian Imperial Bank is 13.34 times less risky than South Pacific. It trades about 0.07 of its potential returns per unit of risk. South Pacific Metals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  45.00  in South Pacific Metals on December 22, 2024 and sell it today you would earn a total of  3.00  from holding South Pacific Metals or generate 6.67% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  South Pacific Metals

Canadian Imperial Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 5 (%) 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.

South Pacific Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in South Pacific Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, South Pacific may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Canadian Imperial and South Pacific

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

The idea behind Canadian Imperial Bank and South Pacific Metals 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..