Correlation Between Stellar and CIBC Active

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

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

Diversification Opportunities for Stellar and CIBC Active

0.82

Correlation Coefficient

Stellar  CIBC Active

Very poor diversification

The 3 months correlation between Stellar and CIBC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and CIBC Active Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Active Investment and Stellar 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 Stellar are associated (or correlated) with CIBC Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Active Investment has no effect on the direction of Stellar i.e., Stellar and CIBC Active go up and down completely randomly.

Pair Corralation between Stellar and CIBC Active

Assuming the 90 days trading horizon Stellar is expected to generate 47.35 times more return on investment than CIBC Active. However, Stellar is 47.35 times more volatile than CIBC Active Investment. It trades about 0.1 of its potential returns per unit of risk. CIBC Active Investment is currently generating about 0.13 per unit of risk. If you would invest  9.03  in Stellar on October 11, 2024 and sell it today you would earn a total of  29.97  from holding Stellar or generate 331.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	60.0%
Values	Daily Returns

Stellar  vs.  CIBC Active Investment

Stellar

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

CIBC Active Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Active Investment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stellar and CIBC Active

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

The idea behind Stellar and CIBC Active Investment 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.