Correlation Between HSBC Holdings and Canadian Imperial
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings 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 HSBC Holdings and Canadian Imperial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings PLC and Canadian Imperial Bank, you can compare the effects of market volatilities on HSBC Holdings 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 HSBC Holdings with a short position of Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Canadian Imperial.
Diversification Opportunities for HSBC Holdings and Canadian Imperial
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HSBC and Canadian is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC 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 HSBC Holdings 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 HSBC Holdings PLC 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 HSBC Holdings i.e., HSBC Holdings and Canadian Imperial go up and down completely randomly.
Pair Corralation between HSBC Holdings and Canadian Imperial
Given the investment horizon of 90 days HSBC Holdings is expected to generate 2.39 times less return on investment than Canadian Imperial. In addition to that, HSBC Holdings is 1.12 times more volatile than Canadian Imperial Bank. It trades about 0.08 of its total potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.21 per unit of volatility. If you would invest 3,466 in Canadian Imperial Bank on January 20, 2024 and sell it today you would earn a total of 1,256 from holding Canadian Imperial Bank or generate 36.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.19% |
| Values | Daily Returns |
HSBC Holdings PLC vs. Canadian Imperial Bank
Performance |
| Timeline |
| HSBC Holdings PLC |
| Canadian Imperial Bank |
HSBC Holdings and Canadian Imperial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Canadian Imperial
The main advantage of trading using opposite HSBC Holdings and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings 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.| HSBC Holdings vs. ING Group NV | HSBC Holdings vs. Natwest Group PLC | HSBC Holdings vs. Banco Santander SA | HSBC Holdings vs. UBS Group AG |
| 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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