Correlation Between Canadian Imperial and Exco Technologies

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

Diversification Opportunities for Canadian Imperial and Exco Technologies

0.33

Correlation Coefficient

Canadian Imperial  Exco Technologies

Weak diversification

The 3 months correlation between Canadian and Exco is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Exco Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exco Technologies 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 Exco Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exco Technologies has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Exco Technologies go up and down completely randomly.

Pair Corralation between Canadian Imperial and Exco Technologies

Assuming the 90 days trading horizon Canadian Imperial Bank is expected to generate 0.39 times more return on investment than Exco Technologies. However, Canadian Imperial Bank is 2.57 times less risky than Exco Technologies. It trades about 0.09 of its potential returns per unit of risk. Exco Technologies Limited is currently generating about 0.03 per unit of risk. If you would invest  1,841  in Canadian Imperial Bank on September 16, 2024 and sell it today you would earn a total of  689.00  from holding Canadian Imperial Bank or generate 37.43% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Exco Technologies 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.

Exco Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Canadian Imperial and Exco Technologies

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

The idea behind Canadian Imperial Bank and Exco Technologies 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.