Correlation Between Pentagon I and Canadian Imperial

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

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

Diversification Opportunities for Pentagon I and Canadian Imperial

-0.59

Correlation Coefficient

Pentagon I  Canadian Imperial

Excellent diversification

The 3 months correlation between Pentagon and Canadian is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Pentagon I Capital 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 Pentagon I 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 Pentagon I Capital 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 Pentagon I i.e., Pentagon I and Canadian Imperial go up and down completely randomly.

Pair Corralation between Pentagon I and Canadian Imperial

Assuming the 90 days trading horizon Pentagon I Capital is expected to generate 6.19 times more return on investment than Canadian Imperial. However, Pentagon I is 6.19 times more volatile than Canadian Imperial Bank. It trades about 0.04 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.1 per unit of risk. If you would invest  3.00  in Pentagon I Capital on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Pentagon I Capital or generate 0.0% return on investment over 90 days.

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

Pentagon I Capital  vs.  Canadian Imperial Bank

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Canadian Imperial Bank

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Canadian Imperial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pentagon I and Canadian Imperial

The main advantage of trading using opposite Pentagon I and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentagon I 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 Pentagon I Capital 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.