Correlation Between Canadian Imperial and Sabio Holdings

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

Diversification Opportunities for Canadian Imperial and Sabio Holdings

-0.36

Correlation Coefficient

Canadian Imperial  Sabio Holdings

Very good diversification

The 3 months correlation between Canadian and Sabio is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Sabio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabio Holdings 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 Sabio Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabio Holdings has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Sabio Holdings go up and down completely randomly.

Pair Corralation between Canadian Imperial and Sabio Holdings

Assuming the 90 days trading horizon Canadian Imperial is expected to generate 4.0 times less return on investment than Sabio Holdings. But when comparing it to its historical volatility, Canadian Imperial Bank is 19.63 times less risky than Sabio Holdings. It trades about 0.18 of its potential returns per unit of risk. Sabio Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Sabio Holdings on September 26, 2024 and sell it today you would earn a total of  2.00  from holding Sabio Holdings or generate 4.17% 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.  Sabio Holdings

Canadian Imperial Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 14 (%) 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Sabio Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sabio Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Sabio Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Imperial and Sabio Holdings

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

The idea behind Canadian Imperial Bank and Sabio Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.