Correlation Between Canadian Imperial and PowerOf Canada

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

Diversification Opportunities for Canadian Imperial and PowerOf Canada

-0.76

Correlation Coefficient

Canadian Imperial  PowerOf Canada

Pay attention - limited upside

The 3 months correlation between Canadian and PowerOf is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerOf Canada 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 PowerOf Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerOf Canada has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and PowerOf Canada go up and down completely randomly.

Pair Corralation between Canadian Imperial and PowerOf Canada

Assuming the 90 days horizon Canadian Imperial Bank is expected to under-perform the PowerOf Canada. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Imperial Bank is 1.04 times less risky than PowerOf Canada. The stock trades about -0.15 of its potential returns per unit of risk. The Power is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,469  in Power on December 29, 2024 and sell it today you would earn a total of  642.00  from holding Power or generate 14.37% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Power

Canadian Imperial Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian Imperial Bank 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.

PowerOf Canada

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, PowerOf Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Imperial and PowerOf Canada

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

The idea behind Canadian Imperial Bank and Power 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.