Correlation Between Canadian Imperial and Rubicon Organics

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

Diversification Opportunities for Canadian Imperial and Rubicon Organics

-0.38

Correlation Coefficient

Canadian Imperial  Rubicon Organics

Very good diversification

The 3 months correlation between Canadian and Rubicon is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Rubicon Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Organics 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 Rubicon Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Organics has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Rubicon Organics go up and down completely randomly.

Pair Corralation between Canadian Imperial and Rubicon Organics

Assuming the 90 days trading horizon Canadian Imperial is expected to generate 4.3 times less return on investment than Rubicon Organics. But when comparing it to its historical volatility, Canadian Imperial Bank is 17.92 times less risky than Rubicon Organics. It trades about 0.19 of its potential returns per unit of risk. Rubicon Organics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Rubicon Organics on September 25, 2024 and sell it today you would earn a total of  3.00  from holding Rubicon Organics or generate 7.14% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Rubicon Organics

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.

Rubicon Organics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Organics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Rubicon Organics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Imperial and Rubicon Organics

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

The idea behind Canadian Imperial Bank and Rubicon Organics 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.