Correlation Between Canadian Imperial and Canso Credit

Can any of the company-specific risk be diversified away by investing in both Canadian Imperial and Canso Credit 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 Canso Credit 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 Canso Credit Trust, you can compare the effects of market volatilities on Canadian Imperial and Canso Credit 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 Canso Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Imperial and Canso Credit.

Diversification Opportunities for Canadian Imperial and Canso Credit

0.88

Correlation Coefficient

Canadian Imperial  Canso Credit

Very poor diversification

The 3 months correlation between Canadian and Canso is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Canso Credit Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canso Credit Trust 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 Canso Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canso Credit Trust has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Canso Credit go up and down completely randomly.

Pair Corralation between Canadian Imperial and Canso Credit

Assuming the 90 days trading horizon Canadian Imperial is expected to generate 1.25 times less return on investment than Canso Credit. But when comparing it to its historical volatility, Canadian Imperial Bank is 1.4 times less risky than Canso Credit. It trades about 0.2 of its potential returns per unit of risk. Canso Credit Trust is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,512  in Canso Credit Trust on September 23, 2024 and sell it today you would earn a total of  67.00  from holding Canso Credit Trust or generate 4.43% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Canso Credit Trust

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.

Canso Credit Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canso Credit Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canso Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Canadian Imperial and Canso Credit

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

The idea behind Canadian Imperial Bank and Canso Credit Trust 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.