Correlation Between Canadian Imperial and BRP
Can any of the company-specific risk be diversified away by investing in both Canadian Imperial and BRP 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 BRP 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 BRP Inc, you can compare the effects of market volatilities on Canadian Imperial and BRP 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 BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Imperial and BRP.
Diversification Opportunities for Canadian Imperial and BRP
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Canadian and BRP is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and BRP go up and down completely randomly.
Pair Corralation between Canadian Imperial and BRP
Assuming the 90 days horizon Canadian Imperial Bank is expected to generate 0.48 times more return on investment than BRP. However, Canadian Imperial Bank is 2.08 times less risky than BRP. It trades about 0.15 of its potential returns per unit of risk. BRP Inc is currently generating about -0.04 per unit of risk. If you would invest 5,414 in Canadian Imperial Bank on September 12, 2024 and sell it today you would earn a total of 4,012 from holding Canadian Imperial Bank or generate 74.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Imperial Bank vs. BRP Inc
Performance |
| Timeline |
| Canadian Imperial Bank |
| BRP Inc |
Canadian Imperial and BRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Imperial and BRP
The main advantage of trading using opposite Canadian Imperial and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Imperial position performs unexpectedly, BRP 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 BRP will offset losses from the drop in BRP's long position.| Canadian Imperial vs. Bank of Montreal | Canadian Imperial vs. Bank of Nova | Canadian Imperial vs. Royal Bank of | Canadian Imperial vs. Toronto Dominion Bank |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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