Correlation Between CDN IMPERIAL and International Business
Can any of the company-specific risk be diversified away by investing in both CDN IMPERIAL and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on CDN IMPERIAL and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDN IMPERIAL and International Business.
Diversification Opportunities for CDN IMPERIAL and International Business
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CDN and International is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of CDN IMPERIAL i.e., CDN IMPERIAL and International Business go up and down completely randomly.
Pair Corralation between CDN IMPERIAL and International Business
Assuming the 90 days trading horizon CDN IMPERIAL is expected to generate 1.2 times less return on investment than International Business. But when comparing it to its historical volatility, CDN IMPERIAL BANK is 1.09 times less risky than International Business. It trades about 0.09 of its potential returns per unit of risk. International Business Machines is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 11,563 in International Business Machines on October 27, 2024 and sell it today you would earn a total of 9,977 from holding International Business Machines or generate 86.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDN IMPERIAL BANK vs. International Business Machine
Performance |
| Timeline |
| CDN IMPERIAL BANK |
| International Business |
CDN IMPERIAL and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDN IMPERIAL and International Business
The main advantage of trading using opposite CDN IMPERIAL and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDN IMPERIAL position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| CDN IMPERIAL vs. Corporate Travel Management | CDN IMPERIAL vs. Brockhaus Capital Management | CDN IMPERIAL vs. Japan Tobacco | CDN IMPERIAL vs. Sixt Leasing SE |
| International Business vs. Vishay Intertechnology | International Business vs. Kingdee International Software | International Business vs. STRAYER EDUCATION | International Business vs. Strategic Education |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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