Correlation Between CI Europe and CI International
Can any of the company-specific risk be diversified away by investing in both CI Europe and CI International 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 CI Europe and CI International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CI Europe Hedged and CI International Quality, you can compare the effects of market volatilities on CI Europe and CI International 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 CI Europe with a short position of CI International. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI Europe and CI International.
Diversification Opportunities for CI Europe and CI International
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EHE and IQD is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CI Europe Hedged and CI International Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI International Quality and CI Europe 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 CI Europe Hedged are associated (or correlated) with CI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI International Quality has no effect on the direction of CI Europe i.e., CI Europe and CI International go up and down completely randomly.
Pair Corralation between CI Europe and CI International
Assuming the 90 days trading horizon CI Europe Hedged is expected to generate 1.09 times more return on investment than CI International. However, CI Europe is 1.09 times more volatile than CI International Quality. It trades about 0.15 of its potential returns per unit of risk. CI International Quality is currently generating about 0.14 per unit of risk. If you would invest 3,147 in CI Europe Hedged on September 12, 2024 and sell it today you would earn a total of 71.00 from holding CI Europe Hedged or generate 2.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
CI Europe Hedged vs. CI International Quality
Performance |
| Timeline |
| CI Europe Hedged |
| CI International Quality |
CI Europe and CI International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CI Europe and CI International
The main advantage of trading using opposite CI Europe and CI International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CI Europe position performs unexpectedly, CI International 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 CI International will offset losses from the drop in CI International's long position.| CI Europe vs. NBI High Yield | CI Europe vs. NBI Unconstrained Fixed | CI Europe vs. Mackenzie Developed ex North | CI Europe vs. BMO Short Term Bond |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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