Correlation Between East West and Canadian Imperial
Can any of the company-specific risk be diversified away by investing in both East West 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 East West and Canadian Imperial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East West Bancorp and Canadian Imperial Bank, you can compare the effects of market volatilities on East West 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 East West with a short position of Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Canadian Imperial.
Diversification Opportunities for East West and Canadian Imperial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between East and Canadian is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp 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 East West 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 East West Bancorp 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 East West i.e., East West and Canadian Imperial go up and down completely randomly.
Pair Corralation between East West and Canadian Imperial
Given the investment horizon of 90 days East West Bancorp is expected to generate 1.9 times more return on investment than Canadian Imperial. However, East West is 1.9 times more volatile than Canadian Imperial Bank. It trades about 0.05 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.09 per unit of risk. If you would invest 6,485 in East West Bancorp on August 23, 2024 and sell it today you would earn a total of 4,065 from holding East West Bancorp or generate 62.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
East West Bancorp vs. Canadian Imperial Bank
Performance |
| Timeline |
| East West Bancorp |
| Canadian Imperial Bank |
East West and Canadian Imperial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Canadian Imperial
The main advantage of trading using opposite East West and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West 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.| East West vs. Barclays PLC ADR | East West vs. UBS Group AG | East West vs. ING Group NV | East West vs. Citigroup |
| Canadian Imperial vs. Bank of Montreal | Canadian Imperial vs. Toronto Dominion Bank | Canadian Imperial vs. Royal Bank of | Canadian Imperial vs. Citigroup |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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