Correlation Between Canadian Imperial and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both Canadian Imperial and Leons Furniture 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 Canadian Imperial and Leons Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Imperial Bank and Leons Furniture Limited, you can compare the effects of market volatilities on Canadian Imperial and Leons Furniture 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 Canadian Imperial with a short position of Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Imperial and Leons Furniture.
Diversification Opportunities for Canadian Imperial and Leons Furniture
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Canadian and Leons is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and Canadian 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 Canadian Imperial Bank are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Leons Furniture go up and down completely randomly.
Pair Corralation between Canadian Imperial and Leons Furniture
Assuming the 90 days trading horizon Canadian Imperial is expected to generate 2.19 times less return on investment than Leons Furniture. But when comparing it to its historical volatility, Canadian Imperial Bank is 2.86 times less risky than Leons Furniture. It trades about 0.08 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,517 in Leons Furniture Limited on August 28, 2024 and sell it today you would earn a total of 1,153 from holding Leons Furniture Limited or generate 76.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Imperial Bank vs. Leons Furniture Limited
Performance |
| Timeline |
| Canadian Imperial Bank |
| Leons Furniture |
Canadian Imperial and Leons Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Imperial and Leons Furniture
The main advantage of trading using opposite Canadian Imperial and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Imperial position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.| Canadian Imperial vs. North American Construction | Canadian Imperial vs. Perseus Mining | Canadian Imperial vs. Costco Wholesale Corp | Canadian Imperial vs. Canlan Ice Sports |
| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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