Correlation Between Canadian Imperial and Fanhua

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

Diversification Opportunities for Canadian Imperial and Fanhua

-0.5

Correlation Coefficient

Canadian Imperial  Fanhua

Very good diversification

The 3 months correlation between Canadian and Fanhua is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Fanhua Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanhua Inc 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 Fanhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanhua Inc has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Fanhua go up and down completely randomly.

Pair Corralation between Canadian Imperial and Fanhua

Allowing for the 90-day total investment horizon Canadian Imperial is expected to generate 1.72 times less return on investment than Fanhua. But when comparing it to its historical volatility, Canadian Imperial Bank is 5.63 times less risky than Fanhua. It trades about 0.09 of its potential returns per unit of risk. Fanhua Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Fanhua Inc on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Fanhua Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Canadian Imperial Bank  vs.  Fanhua Inc

Canadian Imperial Bank

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Canadian Imperial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fanhua Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fanhua Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Fanhua may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Canadian Imperial and Fanhua

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

The idea behind Canadian Imperial Bank and Fanhua Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.