Correlation Between CDN IMPERIAL and Qingdao Port

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

By analyzing existing cross correlation between CDN IMPERIAL BANK and Qingdao Port International, you can compare the effects of market volatilities on CDN IMPERIAL and Qingdao Port 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 CDN IMPERIAL with a short position of Qingdao Port. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDN IMPERIAL and Qingdao Port.

Diversification Opportunities for CDN IMPERIAL and Qingdao Port

0.82

Correlation Coefficient

CDN IMPERIAL  Qingdao Port

Very poor diversification

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

Pair Corralation between CDN IMPERIAL and Qingdao Port

Assuming the 90 days trading horizon CDN IMPERIAL is expected to generate 3.27 times less return on investment than Qingdao Port. But when comparing it to its historical volatility, CDN IMPERIAL BANK is 3.98 times less risky than Qingdao Port. It trades about 0.18 of its potential returns per unit of risk. Qingdao Port International is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Qingdao Port International on September 27, 2024 and sell it today you would earn a total of  19.00  from holding Qingdao Port International or generate 35.85% return on investment over 90 days.

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

CDN IMPERIAL BANK  vs.  Qingdao Port International

CDN IMPERIAL BANK

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, CDN IMPERIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Qingdao Port Interna

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Port International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Qingdao Port reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CDN IMPERIAL and Qingdao Port

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

The idea behind CDN IMPERIAL BANK and Qingdao Port International 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.