Correlation Between KCE EL and CDN IMPERIAL

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Can any of the company-specific risk be diversified away by investing in both KCE EL and CDN 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 KCE EL and CDN IMPERIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KCE EL PCL and CDN IMPERIAL BANK, you can compare the effects of market volatilities on KCE EL and CDN 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 KCE EL with a short position of CDN IMPERIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of KCE EL and CDN IMPERIAL.

Diversification Opportunities for KCE EL and CDN IMPERIAL

-0.83
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between KCE and CDN is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding KCE EL PCL and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK and KCE EL 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 KCE EL PCL are associated (or correlated) with CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of KCE EL i.e., KCE EL and CDN IMPERIAL go up and down completely randomly.

Pair Corralation between KCE EL and CDN IMPERIAL

Assuming the 90 days trading horizon KCE EL PCL is expected to under-perform the CDN IMPERIAL. In addition to that, KCE EL is 3.86 times more volatile than CDN IMPERIAL BANK. It trades about -0.42 of its total potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about 0.22 per unit of volatility. If you would invest  5,800  in CDN IMPERIAL BANK on September 5, 2024 and sell it today you would earn a total of  250.00  from holding CDN IMPERIAL BANK or generate 4.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

KCE EL PCL  vs.  CDN IMPERIAL BANK

 Performance 
       Timeline  
KCE EL PCL 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days KCE EL PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
CDN IMPERIAL BANK 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, CDN IMPERIAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

KCE EL and CDN IMPERIAL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KCE EL and CDN IMPERIAL

The main advantage of trading using opposite KCE EL and CDN IMPERIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KCE EL position performs unexpectedly, CDN 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 CDN IMPERIAL will offset losses from the drop in CDN IMPERIAL's long position.
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The idea behind KCE EL PCL and CDN IMPERIAL BANK 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.
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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