Correlation Between Canadian Imperial and Telus Corp

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

Diversification Opportunities for Canadian Imperial and Telus Corp

-0.4

Correlation Coefficient

Canadian Imperial  Telus Corp

Very good diversification

The 3 months correlation between Canadian and Telus is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Telus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telus Corp 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 Telus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telus Corp has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Telus Corp go up and down completely randomly.

Pair Corralation between Canadian Imperial and Telus Corp

Assuming the 90 days horizon Canadian Imperial Bank is expected to generate 0.71 times more return on investment than Telus Corp. However, Canadian Imperial Bank is 1.4 times less risky than Telus Corp. It trades about 0.34 of its potential returns per unit of risk. Telus Corp is currently generating about 0.0 per unit of risk. If you would invest  7,762  in Canadian Imperial Bank on September 3, 2024 and sell it today you would earn a total of  1,326  from holding Canadian Imperial Bank or generate 17.08% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Telus Corp

Canadian Imperial Bank

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 27 (%) 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.

Telus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Telus Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Canadian Imperial and Telus Corp

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

The idea behind Canadian Imperial Bank and Telus Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.