Correlation Between Canadian Imperial and Bank of Nova Scotia
Can any of the company-specific risk be diversified away by investing in both Canadian Imperial and Bank of Nova Scotia 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 Bank of Nova Scotia 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 Bank of Nova, you can compare the effects of market volatilities on Canadian Imperial and Bank of Nova Scotia 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 Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Imperial and Bank of Nova Scotia.
Diversification Opportunities for Canadian Imperial and Bank of Nova Scotia
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and Bank is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Bank of Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nova Scotia 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 Bank of Nova Scotia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Nova Scotia has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Bank of Nova Scotia go up and down completely randomly.
Pair Corralation between Canadian Imperial and Bank of Nova Scotia
Allowing for the 90-day total investment horizon Canadian Imperial Bank is expected to generate 1.06 times more return on investment than Bank of Nova Scotia. However, Canadian Imperial is 1.06 times more volatile than Bank of Nova. It trades about 0.07 of its potential returns per unit of risk. Bank of Nova is currently generating about 0.02 per unit of risk. If you would invest 4,179 in Canadian Imperial Bank on November 2, 2024 and sell it today you would earn a total of 2,189 from holding Canadian Imperial Bank or generate 52.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Canadian Imperial Bank vs. Bank of Nova
Performance |
| Timeline |
| Canadian Imperial Bank |
| Bank of Nova Scotia |
Canadian Imperial and Bank of Nova Scotia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Imperial and Bank of Nova Scotia
The main advantage of trading using opposite Canadian Imperial and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Imperial position performs unexpectedly, Bank of Nova Scotia 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 Bank of Nova Scotia will offset losses from the drop in Bank of Nova Scotia's long position.| Canadian Imperial vs. Bank of Montreal | Canadian Imperial vs. Toronto Dominion Bank | Canadian Imperial vs. Royal Bank of | Canadian Imperial vs. Citigroup |
| Bank of Nova Scotia vs. Toronto Dominion Bank | Bank of Nova Scotia vs. Royal Bank of | Bank of Nova Scotia vs. Canadian Imperial Bank | Bank of Nova Scotia vs. JPMorgan Chase Co |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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