Correlation Between First Asset and CIBC Clean

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

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

Diversification Opportunities for First Asset and CIBC Clean

0.31

Correlation Coefficient

First Asset  CIBC Clean

Weak diversification

The 3 months correlation between First and CIBC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Energy 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 First Asset 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 First Asset Energy 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 First Asset i.e., First Asset and CIBC Clean go up and down completely randomly.

Pair Corralation between First Asset and CIBC Clean

Assuming the 90 days trading horizon First Asset Energy is expected to under-perform the CIBC Clean. But the etf apears to be less risky and, when comparing its historical volatility, First Asset Energy is 1.69 times less risky than CIBC Clean. The etf trades about -0.01 of its potential returns per unit of risk. The CIBC Clean Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  843.00  in CIBC Clean Energy on September 3, 2024 and sell it today you would lose (9.00) from holding CIBC Clean Energy or give up 1.07% of portfolio value over 90 days.

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

First Asset Energy  vs.  CIBC Clean Energy

First Asset Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 First Asset and CIBC Clean

The main advantage of trading using opposite First Asset and CIBC Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Asset 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 First Asset Energy 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.