Correlation Between Microsoft and Canadian Imperial

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

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

Diversification Opportunities for Microsoft and Canadian Imperial

0.95

Correlation Coefficient

Microsoft  Canadian Imperial

Almost no diversification

The 3 months correlation between Microsoft and Canadian is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Canadian Imperial go up and down completely randomly.

Pair Corralation between Microsoft and Canadian Imperial

Assuming the 90 days trading horizon Microsoft is expected to generate 1.41 times more return on investment than Canadian Imperial. However, Microsoft is 1.41 times more volatile than Canadian Imperial Bank. It trades about -0.11 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about -0.21 per unit of risk. If you would invest  40,868  in Microsoft on December 24, 2024 and sell it today you would lose (4,518) from holding Microsoft or give up 11.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Microsoft  vs.  Canadian Imperial Bank

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and Canadian Imperial

The main advantage of trading using opposite Microsoft and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.