Correlation Between Talon Metals and Canadian Imperial

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

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

Diversification Opportunities for Talon Metals and Canadian Imperial

-0.15

Correlation Coefficient

Talon Metals  Canadian Imperial

Good diversification

The 3 months correlation between Talon and Canadian is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Talon Metals 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 Talon Metals 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 Talon Metals 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 Talon Metals i.e., Talon Metals and Canadian Imperial go up and down completely randomly.

Pair Corralation between Talon Metals and Canadian Imperial

Assuming the 90 days trading horizon Talon Metals Corp is expected to generate 22.6 times more return on investment than Canadian Imperial. However, Talon Metals is 22.6 times more volatile than Canadian Imperial Bank. It trades about 0.14 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.2 per unit of risk. If you would invest  8.00  in Talon Metals Corp on September 4, 2024 and sell it today you would earn a total of  1.00  from holding Talon Metals Corp or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Talon Metals Corp  vs.  Canadian Imperial Bank

Talon Metals Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talon Metals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Talon Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Canadian Imperial Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 9 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Talon Metals and Canadian Imperial

The main advantage of trading using opposite Talon Metals and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talon Metals 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 Talon Metals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.