Correlation Between Rocky Mountain and Canadian Imperial

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

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

Diversification Opportunities for Rocky Mountain and Canadian Imperial

-0.69

Correlation Coefficient

Rocky Mountain  Canadian Imperial

Excellent diversification

The 3 months correlation between Rocky and Canadian is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor 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 Rocky Mountain 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 Rocky Mountain Liquor 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 Rocky Mountain i.e., Rocky Mountain and Canadian Imperial go up and down completely randomly.

Pair Corralation between Rocky Mountain and Canadian Imperial

Assuming the 90 days horizon Rocky Mountain Liquor is expected to generate 7.54 times more return on investment than Canadian Imperial. However, Rocky Mountain is 7.54 times more volatile than Canadian Imperial Bank. It trades about 0.01 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.09 per unit of risk. If you would invest  14.00  in Rocky Mountain Liquor on September 19, 2024 and sell it today you would lose (4.00) from holding Rocky Mountain Liquor or give up 28.57% of portfolio value over 90 days.

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

Rocky Mountain Liquor  vs.  Canadian Imperial Bank

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Canadian Imperial Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 12 (%) 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 Rocky Mountain and Canadian Imperial

The main advantage of trading using opposite Rocky Mountain and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Mountain 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 Rocky Mountain Liquor 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.