Correlation Between CIBC Sustainable and CIBC Clean

Can any of the company-specific risk be diversified away by investing in both CIBC Sustainable and CIBC Clean 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 CIBC Sustainable and CIBC Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CIBC Sustainable Balanced and CIBC Clean Energy, you can compare the effects of market volatilities on CIBC Sustainable and CIBC Clean 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 CIBC Sustainable with a short position of CIBC Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of CIBC Sustainable and CIBC Clean.

Diversification Opportunities for CIBC Sustainable and CIBC Clean

0.1

Correlation Coefficient

CIBC Sustainable  CIBC Clean

Average diversification

The 3 months correlation between CIBC and CIBC is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CIBC Sustainable Balanced and CIBC Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Clean Energy and CIBC Sustainable 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 CIBC Sustainable Balanced are associated (or correlated) with CIBC Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Clean Energy has no effect on the direction of CIBC Sustainable i.e., CIBC Sustainable and CIBC Clean go up and down completely randomly.

Pair Corralation between CIBC Sustainable and CIBC Clean

Assuming the 90 days trading horizon CIBC Sustainable Balanced is expected to generate 0.76 times more return on investment than CIBC Clean. However, CIBC Sustainable Balanced is 1.31 times less risky than CIBC Clean. It trades about 0.13 of its potential returns per unit of risk. CIBC Clean Energy is currently generating about 0.0 per unit of risk. If you would invest  2,045  in CIBC Sustainable Balanced on September 3, 2024 and sell it today you would earn a total of  232.00  from holding CIBC Sustainable Balanced or generate 11.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

CIBC Sustainable Balanced  vs.  CIBC Clean Energy

CIBC Sustainable Balanced

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Sustainable Balanced are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, CIBC Sustainable may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CIBC Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIBC Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CIBC Clean is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CIBC Sustainable and CIBC Clean

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

The idea behind CIBC Sustainable Balanced and CIBC Clean Energy 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.