Correlation Between CDN IMPERIAL and Alfa Financial
Can any of the company-specific risk be diversified away by investing in both CDN IMPERIAL and Alfa Financial 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 Alfa Financial 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 Alfa Financial Software, you can compare the effects of market volatilities on CDN IMPERIAL and Alfa Financial 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 Alfa Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDN IMPERIAL and Alfa Financial.
Diversification Opportunities for CDN IMPERIAL and Alfa Financial
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CDN and Alfa is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software 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 Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and Alfa Financial go up and down completely randomly.
Pair Corralation between CDN IMPERIAL and Alfa Financial
Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to generate 0.49 times more return on investment than Alfa Financial. However, CDN IMPERIAL BANK is 2.02 times less risky than Alfa Financial. It trades about 0.26 of its potential returns per unit of risk. Alfa Financial Software is currently generating about 0.08 per unit of risk. If you would invest 4,265 in CDN IMPERIAL BANK on September 29, 2024 and sell it today you would earn a total of 1,778 from holding CDN IMPERIAL BANK or generate 41.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDN IMPERIAL BANK vs. Alfa Financial Software
Performance |
| Timeline |
| CDN IMPERIAL BANK |
| Alfa Financial Software |
CDN IMPERIAL and Alfa Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDN IMPERIAL and Alfa Financial
The main advantage of trading using opposite CDN IMPERIAL and Alfa Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDN IMPERIAL position performs unexpectedly, Alfa Financial 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 Alfa Financial will offset losses from the drop in Alfa Financial's long position.The idea behind CDN IMPERIAL BANK and Alfa Financial Software 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.| Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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