Correlation Between CDN IMPERIAL and Qingdao Haier

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Can any of the company-specific risk be diversified away by investing in both CDN IMPERIAL and Qingdao Haier 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 CDN IMPERIAL and Qingdao Haier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDN IMPERIAL BANK and Qingdao Haier Co, you can compare the effects of market volatilities on CDN IMPERIAL and Qingdao Haier 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 CDN IMPERIAL with a short position of Qingdao Haier. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDN IMPERIAL and Qingdao Haier.

Diversification Opportunities for CDN IMPERIAL and Qingdao Haier

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between CDN and Qingdao is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and Qingdao Haier Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Haier and CDN 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 CDN IMPERIAL BANK are associated (or correlated) with Qingdao Haier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Haier has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and Qingdao Haier go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and Qingdao Haier

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to generate 0.6 times more return on investment than Qingdao Haier. However, CDN IMPERIAL BANK is 1.66 times less risky than Qingdao Haier. It trades about 0.28 of its potential returns per unit of risk. Qingdao Haier Co is currently generating about 0.01 per unit of risk. If you would invest  5,800  in CDN IMPERIAL BANK on September 4, 2024 and sell it today you would earn a total of  309.00  from holding CDN IMPERIAL BANK or generate 5.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

CDN IMPERIAL BANK  vs.  Qingdao Haier Co

 Performance 
       Timeline  
CDN IMPERIAL BANK 

Risk-Adjusted Performance

25 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, CDN IMPERIAL unveiled solid returns over the last few months and may actually be approaching a breakup point.
Qingdao Haier 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Haier Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Qingdao Haier exhibited solid returns over the last few months and may actually be approaching a breakup point.

CDN IMPERIAL and Qingdao Haier Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CDN IMPERIAL and Qingdao Haier

The main advantage of trading using opposite CDN IMPERIAL and Qingdao Haier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDN IMPERIAL position performs unexpectedly, Qingdao Haier 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 Qingdao Haier will offset losses from the drop in Qingdao Haier's long position.
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The idea behind CDN IMPERIAL BANK and Qingdao Haier Co 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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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 Global Correlations module to find global opportunities by holding instruments from different markets.

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