Correlation Between Canadian Imperial and BRP

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

Diversification Opportunities for Canadian Imperial and BRP

-0.56

Correlation Coefficient

Canadian Imperial  BRP

Excellent diversification

The 3 months correlation between Canadian and BRP is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and BRP go up and down completely randomly.

Pair Corralation between Canadian Imperial and BRP

Assuming the 90 days horizon Canadian Imperial Bank is expected to under-perform the BRP. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Imperial Bank is 3.0 times less risky than BRP. The stock trades about -0.23 of its potential returns per unit of risk. The BRP Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,260  in BRP Inc on October 7, 2024 and sell it today you would earn a total of  116.00  from holding BRP Inc or generate 1.6% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  BRP Inc

Canadian Imperial Bank

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Canadian Imperial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Canadian Imperial and BRP

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

The idea behind Canadian Imperial Bank and BRP Inc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.