Correlation Between Canadian Imperial and Capital One

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

Diversification Opportunities for Canadian Imperial and Capital One

-0.48

Correlation Coefficient

Canadian Imperial  Capital One

Very good diversification

The 3 months correlation between Canadian and Capital is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Capital One go up and down completely randomly.

Pair Corralation between Canadian Imperial and Capital One

Allowing for the 90-day total investment horizon Canadian Imperial Bank is expected to generate 0.69 times more return on investment than Capital One. However, Canadian Imperial Bank is 1.45 times less risky than Capital One. It trades about 0.14 of its potential returns per unit of risk. Capital One Financial is currently generating about -0.04 per unit of risk. If you would invest  5,909  in Canadian Imperial Bank on September 5, 2024 and sell it today you would earn a total of  438.00  from holding Canadian Imperial Bank or generate 7.41% 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.  Capital One Financial

Canadian Imperial Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Canadian Imperial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Capital One Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Capital One is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Canadian Imperial and Capital One

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

The idea behind Canadian Imperial Bank and Capital One Financial 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.