Correlation Between Definity Financial and Canadian Imperial
Can any of the company-specific risk be diversified away by investing in both Definity Financial and Canadian Imperial 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 Definity Financial and Canadian Imperial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Definity Financial Corp and Canadian Imperial Bank, you can compare the effects of market volatilities on Definity Financial and Canadian Imperial 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 Definity Financial with a short position of Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Definity Financial and Canadian Imperial.
Diversification Opportunities for Definity Financial and Canadian Imperial
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Definity and Canadian is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Definity Financial Corp and Canadian Imperial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Imperial Bank and Definity Financial 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 Definity Financial Corp are associated (or correlated) with Canadian Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Imperial Bank has no effect on the direction of Definity Financial i.e., Definity Financial and Canadian Imperial go up and down completely randomly.
Pair Corralation between Definity Financial and Canadian Imperial
Assuming the 90 days trading horizon Definity Financial Corp is expected to generate 1.94 times more return on investment than Canadian Imperial. However, Definity Financial is 1.94 times more volatile than Canadian Imperial Bank. It trades about 0.08 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.08 per unit of risk. If you would invest 3,622 in Definity Financial Corp on August 31, 2024 and sell it today you would earn a total of 2,244 from holding Definity Financial Corp or generate 61.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Definity Financial Corp vs. Canadian Imperial Bank
Performance |
| Timeline |
| Definity Financial Corp |
| Canadian Imperial Bank |
Definity Financial and Canadian Imperial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Definity Financial and Canadian Imperial
The main advantage of trading using opposite Definity Financial and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definity Financial position performs unexpectedly, Canadian Imperial 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 Canadian Imperial will offset losses from the drop in Canadian Imperial's long position.| Definity Financial vs. iShares Canadian HYBrid | Definity Financial vs. Brompton European Dividend | Definity Financial vs. Solar Alliance Energy | Definity Financial vs. PHN Multi Style All Cap |
| Canadian Imperial vs. E Split Corp | Canadian Imperial vs. E Split Corp | Canadian Imperial vs. Sage Potash Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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