Correlation Between Pembina Pipeline and Canadian Imperial

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

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

Diversification Opportunities for Pembina Pipeline and Canadian Imperial

-0.2

Correlation Coefficient

Pembina Pipeline  Canadian Imperial

Good diversification

The 3 months correlation between Pembina and Canadian is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline i.e., Pembina Pipeline and Canadian Imperial go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Canadian Imperial

Assuming the 90 days trading horizon Pembina Pipeline is expected to generate 1.16 times less return on investment than Canadian Imperial. In addition to that, Pembina Pipeline is 1.27 times more volatile than Canadian Imperial Bank. It trades about 0.06 of its total potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.09 per unit of volatility. If you would invest  1,878  in Canadian Imperial Bank on September 21, 2024 and sell it today you would earn a total of  670.00  from holding Canadian Imperial Bank or generate 35.68% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Canadian Imperial Bank

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Pembina Pipeline is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Canadian Imperial Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 15 (%) 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 Pembina Pipeline and Canadian Imperial

The main advantage of trading using opposite Pembina Pipeline and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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 Pembina Pipeline 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.