Correlation Between Canadian Imperial and Power

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

Diversification Opportunities for Canadian Imperial and Power

0.94

Correlation Coefficient

Canadian Imperial  Power

Almost no diversification

The 3 months correlation between Canadian and Power is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power 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 Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Power go up and down completely randomly.

Pair Corralation between Canadian Imperial and Power

Assuming the 90 days horizon Canadian Imperial Bank is expected to generate 0.9 times more return on investment than Power. However, Canadian Imperial Bank is 1.11 times less risky than Power. It trades about 0.27 of its potential returns per unit of risk. Power is currently generating about 0.17 per unit of risk. If you would invest  6,586  in Canadian Imperial Bank on September 3, 2024 and sell it today you would earn a total of  2,419  from holding Canadian Imperial Bank or generate 36.73% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Power

Canadian Imperial Bank

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Canadian Imperial displayed solid returns over the last few months and may actually be approaching a breakup point.

Power

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Power are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Imperial and Power

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

The idea behind Canadian Imperial Bank and Power 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.