Correlation Between Microsoft and Canadian Imperial
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Canadian Imperial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Canadian Imperial Bank, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Canadian Imperial.
Diversification Opportunities for Microsoft and Canadian Imperial
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Canadian is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Canadian Imperial go up and down completely randomly.
Pair Corralation between Microsoft and Canadian Imperial
Given the investment horizon of 90 days Microsoft is expected to under-perform the Canadian Imperial. In addition to that, Microsoft is 3.58 times more volatile than Canadian Imperial Bank. It trades about -0.04 of its total potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.39 per unit of volatility. If you would invest 8,795 in Canadian Imperial Bank on August 27, 2024 and sell it today you would earn a total of 347.00 from holding Canadian Imperial Bank or generate 3.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Canadian Imperial Bank
Performance |
| Timeline |
| Microsoft |
| Canadian Imperial Bank |
Microsoft and Canadian Imperial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Canadian Imperial
The main advantage of trading using opposite Microsoft and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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