Correlation Between Laurentian Bank and CI Financial

Can any of the company-specific risk be diversified away by investing in both Laurentian Bank and CI Financial 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 Laurentian Bank and CI Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Laurentian Bank and CI Financial

0.89

Correlation Coefficient

Laurentian Bank  CI Financial

Very poor diversification

The 3 months correlation between Laurentian and CIX is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank and CI Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Financial Corp and Laurentian Bank 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 Laurentian Bank are associated (or correlated) with CI Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Financial Corp has no effect on the direction of Laurentian Bank i.e., Laurentian Bank and CI Financial go up and down completely randomly.

Pair Corralation between Laurentian Bank and CI Financial

Assuming the 90 days horizon Laurentian Bank is expected to generate 66.35 times less return on investment than CI Financial. But when comparing it to its historical volatility, Laurentian Bank is 1.3 times less risky than CI Financial. It trades about 0.0 of its potential returns per unit of risk. CI Financial Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,067  in CI Financial Corp on October 4, 2024 and sell it today you would earn a total of  2,027  from holding CI Financial Corp or generate 189.97% return on investment over 90 days.

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

Laurentian Bank  vs.  CI Financial Corp

Laurentian Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Laurentian Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CI Financial Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Financial Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laurentian Bank and CI Financial

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

The idea behind Laurentian Bank and CI Financial Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.