Correlation Between Mackenzie Large and CIBC Canadian

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

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

Diversification Opportunities for Mackenzie Large and CIBC Canadian

0.61

Correlation Coefficient

Mackenzie Large  CIBC Canadian

Poor diversification

The 3 months correlation between Mackenzie and CIBC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Mackenzie Large Cap and CIBC Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Canadian Equity and Mackenzie Large 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 Mackenzie Large Cap are associated (or correlated) with CIBC Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Canadian Equity has no effect on the direction of Mackenzie Large i.e., Mackenzie Large and CIBC Canadian go up and down completely randomly.

Pair Corralation between Mackenzie Large and CIBC Canadian

Assuming the 90 days trading horizon Mackenzie Large Cap is expected to under-perform the CIBC Canadian. In addition to that, Mackenzie Large is 1.22 times more volatile than CIBC Canadian Equity. It trades about -0.09 of its total potential returns per unit of risk. CIBC Canadian Equity is currently generating about 0.03 per unit of volatility. If you would invest  2,671  in CIBC Canadian Equity on December 30, 2024 and sell it today you would earn a total of  35.00  from holding CIBC Canadian Equity or generate 1.31% return on investment over 90 days.

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

Mackenzie Large Cap  vs.  CIBC Canadian Equity

Mackenzie Large Cap

Risk-Adjusted Performance

Very Weak

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

CIBC Canadian Equity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Canadian Equity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Canadian is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Mackenzie Large and CIBC Canadian

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

The idea behind Mackenzie Large Cap and CIBC Canadian Equity 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.