Correlation Between CI Canada and CIBC Sustainable

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

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

Diversification Opportunities for CI Canada and CIBC Sustainable

0.23

Correlation Coefficient

CI Canada  CIBC Sustainable

Modest diversification

The 3 months correlation between FLI and CIBC is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CI Canada Lifeco and CIBC Sustainable Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Sustainable Balanced and CI Canada 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 CI Canada Lifeco are associated (or correlated) with CIBC Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Sustainable Balanced has no effect on the direction of CI Canada i.e., CI Canada and CIBC Sustainable go up and down completely randomly.

Pair Corralation between CI Canada and CIBC Sustainable

Assuming the 90 days trading horizon CI Canada Lifeco is expected to generate 0.77 times more return on investment than CIBC Sustainable. However, CI Canada Lifeco is 1.3 times less risky than CIBC Sustainable. It trades about 0.18 of its potential returns per unit of risk. CIBC Sustainable Balanced is currently generating about 0.13 per unit of risk. If you would invest  1,065  in CI Canada Lifeco on September 3, 2024 and sell it today you would earn a total of  134.00  from holding CI Canada Lifeco or generate 12.58% return on investment over 90 days.

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

CI Canada Lifeco  vs.  CIBC Sustainable Balanced

CI Canada Lifeco

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canada Lifeco are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, CI Canada may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with CI Canada and CIBC Sustainable

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

The idea behind CI Canada Lifeco and CIBC Sustainable Balanced 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.