Correlation Between InPlay Oil and Canadian Imperial

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

By analyzing existing cross correlation between InPlay Oil Corp and Canadian Imperial Bank, you can compare the effects of market volatilities on InPlay Oil and Canadian 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 InPlay Oil with a short position of Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and Canadian Imperial.

Diversification Opportunities for InPlay Oil and Canadian Imperial

-0.51

Correlation Coefficient

InPlay Oil  Canadian Imperial

Excellent diversification

The 3 months correlation between InPlay and Canadian is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Canadian Imperial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Imperial Bank and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with Canadian Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Imperial Bank has no effect on the direction of InPlay Oil i.e., InPlay Oil and Canadian Imperial go up and down completely randomly.

Pair Corralation between InPlay Oil and Canadian Imperial

Assuming the 90 days trading horizon InPlay Oil Corp is expected to generate 7.41 times more return on investment than Canadian Imperial. However, InPlay Oil is 7.41 times more volatile than Canadian Imperial Bank. It trades about 0.15 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.11 per unit of risk. If you would invest  160.00  in InPlay Oil Corp on October 24, 2024 and sell it today you would earn a total of  10.00  from holding InPlay Oil Corp or generate 6.25% return on investment over 90 days.

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

InPlay Oil Corp  vs.  Canadian Imperial Bank

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Canadian Imperial Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Canadian Imperial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with InPlay Oil and Canadian Imperial

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

The idea behind InPlay Oil Corp and Canadian 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.