Correlation Between CI International and CI Europe
Can any of the company-specific risk be diversified away by investing in both CI International and CI Europe 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 International and CI Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CI International Quality and CI Europe Hedged, you can compare the effects of market volatilities on CI International and CI Europe 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 International with a short position of CI Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI International and CI Europe.
Diversification Opportunities for CI International and CI Europe
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IQD and EHE is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CI International Quality and CI Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Europe Hedged and CI International 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 International Quality are associated (or correlated) with CI Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Europe Hedged has no effect on the direction of CI International i.e., CI International and CI Europe go up and down completely randomly.
Pair Corralation between CI International and CI Europe
Assuming the 90 days trading horizon CI International Quality is expected to generate 0.81 times more return on investment than CI Europe. However, CI International Quality is 1.24 times less risky than CI Europe. It trades about 0.26 of its potential returns per unit of risk. CI Europe Hedged is currently generating about 0.13 per unit of risk. If you would invest 3,374 in CI International Quality on September 13, 2024 and sell it today you would earn a total of 114.00 from holding CI International Quality or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
CI International Quality vs. CI Europe Hedged
Performance |
| Timeline |
| CI International Quality |
| CI Europe Hedged |
CI International and CI Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CI International and CI Europe
The main advantage of trading using opposite CI International and CI Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CI International position performs unexpectedly, CI Europe 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 Europe will offset losses from the drop in CI Europe's long position.The idea behind CI International Quality and CI Europe Hedged pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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