Correlation Between Invesco SP and CIBC Canadian

Can any of the company-specific risk be diversified away by investing in both Invesco SP and CIBC Canadian 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 Invesco SP and CIBC Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco SP 500 and CIBC Canadian Equity, you can compare the effects of market volatilities on Invesco SP and CIBC Canadian 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 Invesco SP with a short position of CIBC Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and CIBC Canadian.

Diversification Opportunities for Invesco SP and CIBC Canadian

0.81

Correlation Coefficient

Invesco SP  CIBC Canadian

Very poor diversification

The 3 months correlation between Invesco and CIBC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and CIBC Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Canadian Equity and Invesco SP 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 Invesco SP 500 are associated (or correlated) with CIBC Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Canadian Equity has no effect on the direction of Invesco SP i.e., Invesco SP and CIBC Canadian go up and down completely randomly.

Pair Corralation between Invesco SP and CIBC Canadian

Assuming the 90 days trading horizon Invesco SP 500 is expected to under-perform the CIBC Canadian. But the etf apears to be less risky and, when comparing its historical volatility, Invesco SP 500 is 1.05 times less risky than CIBC Canadian. The etf trades about -0.02 of its potential returns per unit of risk. The CIBC Canadian Equity is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,671  in CIBC Canadian Equity on December 30, 2024 and sell it today you would earn a total of  35.00  from holding CIBC Canadian Equity or generate 1.31% return on investment over 90 days.

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

Invesco SP 500  vs.  CIBC Canadian Equity

Invesco SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Invesco SP is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

CIBC Canadian Equity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Canadian Equity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Canadian is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco SP and CIBC Canadian

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

The idea behind Invesco SP 500 and CIBC Canadian Equity 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..