Correlation Between Canadian Imperial and National Bank
Can any of the company-specific risk be diversified away by investing in both Canadian Imperial and National Bank 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 National Bank 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 National Bank of, you can compare the effects of market volatilities on Canadian Imperial and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Imperial and National Bank.
Diversification Opportunities for Canadian Imperial and National Bank
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Canadian and National is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and National Bank go up and down completely randomly.
Pair Corralation between Canadian Imperial and National Bank
Assuming the 90 days trading horizon Canadian Imperial is expected to generate 5.39 times less return on investment than National Bank. But when comparing it to its historical volatility, Canadian Imperial Bank is 2.04 times less risky than National Bank. It trades about 0.12 of its potential returns per unit of risk. National Bank of is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,321 in National Bank of on August 28, 2024 and sell it today you would earn a total of 71.00 from holding National Bank of or generate 3.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Imperial Bank vs. National Bank of
Performance |
| Timeline |
| Canadian Imperial Bank |
| National Bank |
Canadian Imperial and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Imperial and National Bank
The main advantage of trading using opposite Canadian Imperial and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Imperial position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank'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 |
| National Bank vs. Forstrong Global Income | National Bank vs. BMO Aggregate Bond | National Bank vs. Terreno Resources Corp | National Bank vs. iShares Canadian HYBrid |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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