Correlation Between Renesas Electronics and CDN IMPERIAL

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

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

Diversification Opportunities for Renesas Electronics and CDN IMPERIAL

-0.66

Correlation Coefficient

Renesas Electronics  CDN IMPERIAL

Excellent diversification

The 3 months correlation between Renesas and CDN is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics 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 Renesas Electronics 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 Renesas Electronics 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 Renesas Electronics i.e., Renesas Electronics and CDN IMPERIAL go up and down completely randomly.

Pair Corralation between Renesas Electronics and CDN IMPERIAL

Assuming the 90 days horizon Renesas Electronics is expected to under-perform the CDN IMPERIAL. In addition to that, Renesas Electronics is 3.17 times more volatile than CDN IMPERIAL BANK. It trades about -0.03 of its total potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about 0.27 per unit of volatility. If you would invest  5,408  in CDN IMPERIAL BANK on September 12, 2024 and sell it today you would earn a total of  886.00  from holding CDN IMPERIAL BANK or generate 16.38% return on investment over 90 days.

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

Renesas Electronics  vs.  CDN IMPERIAL BANK

Renesas Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Renesas Electronics 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

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, CDN IMPERIAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Renesas Electronics and CDN IMPERIAL

The main advantage of trading using opposite Renesas Electronics and CDN IMPERIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renesas Electronics 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 Renesas Electronics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.