Correlation Between FAST RETAIL and CDN IMPERIAL

Can any of the company-specific risk be diversified away by investing in both FAST RETAIL and CDN IMPERIAL 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 FAST RETAIL and CDN IMPERIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FAST RETAIL ADR and CDN IMPERIAL BANK, you can compare the effects of market volatilities on FAST RETAIL and CDN IMPERIAL 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 FAST RETAIL with a short position of CDN IMPERIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and CDN IMPERIAL.

Diversification Opportunities for FAST RETAIL and CDN IMPERIAL

0.36

Correlation Coefficient

FAST RETAIL  CDN IMPERIAL

Weak diversification

The 3 months correlation between FAST and CDN is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK and FAST RETAIL 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 FAST RETAIL ADR are associated (or correlated) with CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and CDN IMPERIAL go up and down completely randomly.

Pair Corralation between FAST RETAIL and CDN IMPERIAL

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the CDN IMPERIAL. In addition to that, FAST RETAIL is 1.56 times more volatile than CDN IMPERIAL BANK. It trades about -0.17 of its total potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about -0.05 per unit of volatility. If you would invest  6,193  in CDN IMPERIAL BANK on October 11, 2024 and sell it today you would lose (70.00) from holding CDN IMPERIAL BANK or give up 1.13% of portfolio value over 90 days.

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

FAST RETAIL ADR  vs.  CDN IMPERIAL BANK

FAST RETAIL ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FAST RETAIL ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FAST RETAIL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CDN IMPERIAL BANK

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, CDN IMPERIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FAST RETAIL and CDN IMPERIAL

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

The idea behind FAST RETAIL ADR and CDN IMPERIAL BANK 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.