Correlation Between CDN IMPERIAL and KRISPY KREME

Can any of the company-specific risk be diversified away by investing in both CDN IMPERIAL and KRISPY KREME 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 KRISPY KREME 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 KRISPY KREME DL 01, you can compare the effects of market volatilities on CDN IMPERIAL and KRISPY KREME 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 KRISPY KREME. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDN IMPERIAL and KRISPY KREME.

Diversification Opportunities for CDN IMPERIAL and KRISPY KREME

0.37

Correlation Coefficient

CDN IMPERIAL  KRISPY KREME

Weak diversification

The 3 months correlation between CDN and KRISPY is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and KRISPY KREME DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRISPY KREME DL 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 KRISPY KREME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRISPY KREME DL has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and KRISPY KREME go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and KRISPY KREME

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to generate 0.32 times more return on investment than KRISPY KREME. However, CDN IMPERIAL BANK is 3.09 times less risky than KRISPY KREME. It trades about 0.34 of its potential returns per unit of risk. KRISPY KREME DL 01 is currently generating about 0.03 per unit of risk. If you would invest  5,131  in CDN IMPERIAL BANK on September 3, 2024 and sell it today you would earn a total of  988.00  from holding CDN IMPERIAL BANK or generate 19.26% return on investment over 90 days.

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

CDN IMPERIAL BANK  vs.  KRISPY KREME DL 01

CDN IMPERIAL BANK

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, CDN IMPERIAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

KRISPY KREME DL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KRISPY KREME DL 01 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KRISPY KREME is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CDN IMPERIAL and KRISPY KREME

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

The idea behind CDN IMPERIAL BANK and KRISPY KREME DL 01 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..