Correlation Between Great West and Canadian Imperial
Can any of the company-specific risk be diversified away by investing in both Great 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 Great 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 Great West Lifeco and Canadian Imperial Bank, you can compare the effects of market volatilities on Great 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 Great West with a short position of Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and Canadian Imperial.
Diversification Opportunities for Great West and Canadian Imperial
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Great and Canadian is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifeco 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 Great 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 Great West Lifeco 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 Great West i.e., Great West and Canadian Imperial go up and down completely randomly.
Pair Corralation between Great West and Canadian Imperial
Assuming the 90 days trading horizon Great West Lifeco is expected to generate 2.1 times more return on investment than Canadian Imperial. However, Great West is 2.1 times more volatile than Canadian Imperial Bank. It trades about 0.39 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.37 per unit of risk. If you would invest 4,686 in Great West Lifeco on September 2, 2024 and sell it today you would earn a total of 355.00 from holding Great West Lifeco or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great West Lifeco vs. Canadian Imperial Bank
Performance |
| Timeline |
| Great West Lifeco |
| Canadian Imperial Bank |
Great West and Canadian Imperial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great West and Canadian Imperial
The main advantage of trading using opposite Great West and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great 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.| Great West vs. Sun Life Financial | Great West vs. Power | Great West vs. Manulife Financial Corp | Great West vs. National Bank of |
| 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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