Correlation Between Canadian Imperial and Athabasca Oil

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

Diversification Opportunities for Canadian Imperial and Athabasca Oil

0.09

Correlation Coefficient

Canadian Imperial  Athabasca Oil

Significant diversification

The 3 months correlation between Canadian and Athabasca is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Athabasca Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athabasca Oil Corp 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 Athabasca Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athabasca Oil Corp has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Athabasca Oil go up and down completely randomly.

Pair Corralation between Canadian Imperial and Athabasca Oil

Assuming the 90 days horizon Canadian Imperial Bank is expected to generate 0.36 times more return on investment than Athabasca Oil. However, Canadian Imperial Bank is 2.74 times less risky than Athabasca Oil. It trades about 0.34 of its potential returns per unit of risk. Athabasca Oil Corp is currently generating about 0.01 per unit of risk. If you would invest  7,762  in Canadian Imperial Bank on September 3, 2024 and sell it today you would earn a total of  1,326  from holding Canadian Imperial Bank or generate 17.08% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Athabasca Oil Corp

Canadian Imperial Bank

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Canadian Imperial displayed solid returns over the last few months and may actually be approaching a breakup point.

Athabasca Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Canadian Imperial and Athabasca Oil

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

The idea behind Canadian Imperial Bank and Athabasca Oil Corp 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.