Correlation Between Visa and Canadian Imperial
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Canadian Imperial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Canadian Imperial Bank, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Canadian Imperial.
Diversification Opportunities for Visa and Canadian Imperial
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Canadian is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Canadian Imperial go up and down completely randomly.
Pair Corralation between Visa and Canadian Imperial
Taking into account the 90-day investment horizon Visa is expected to generate 6.11 times less return on investment than Canadian Imperial. But when comparing it to its historical volatility, Visa Class A is 1.08 times less risky than Canadian Imperial. It trades about 0.02 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,532 in Canadian Imperial Bank on January 25, 2024 and sell it today you would earn a total of 270.00 from holding Canadian Imperial Bank or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Canadian Imperial Bank
Performance |
| Timeline |
| Visa Class A |
| Canadian Imperial Bank |
Visa and Canadian Imperial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Canadian Imperial
The main advantage of trading using opposite Visa and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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