Correlation Between Canadian Imperial and Brookfield Investments

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

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

Diversification Opportunities for Canadian Imperial and Brookfield Investments

0.32

Correlation Coefficient

Canadian Imperial  Brookfield Investments

Weak diversification

The 3 months correlation between Canadian and Brookfield is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Brookfield Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Investments and Canadian 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 Canadian Imperial Bank are associated (or correlated) with Brookfield Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Investments has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Brookfield Investments go up and down completely randomly.

Pair Corralation between Canadian Imperial and Brookfield Investments

Assuming the 90 days trading horizon Canadian Imperial Bank is expected to generate 0.8 times more return on investment than Brookfield Investments. However, Canadian Imperial Bank is 1.25 times less risky than Brookfield Investments. It trades about 0.33 of its potential returns per unit of risk. Brookfield Investments is currently generating about 0.18 per unit of risk. If you would invest  2,510  in Canadian Imperial Bank on September 21, 2024 and sell it today you would earn a total of  38.00  from holding Canadian Imperial Bank or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	54.55%
Values	Daily Returns

Canadian Imperial Bank  vs.  Brookfield Investments

Canadian Imperial Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 15 (%) 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.

Brookfield Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Canadian Imperial and Brookfield Investments

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

The idea behind Canadian Imperial Bank and Brookfield Investments 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..