Correlation Between Banco De and Canadian Imperial

Can any of the company-specific risk be diversified away by investing in both Banco De 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 Banco De and Canadian Imperial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banco De Chile and Canadian Imperial Bank, you can compare the effects of market volatilities on Banco De 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 Banco De with a short position of Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and Canadian Imperial.

Diversification Opportunities for Banco De and Canadian Imperial

0.67

Correlation Coefficient

Banco De  Canadian Imperial

Poor diversification

The 3 months correlation between Banco and Canadian is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Banco De Chile 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 Banco De 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 Banco De Chile 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 Banco De i.e., Banco De and Canadian Imperial go up and down completely randomly.

Pair Corralation between Banco De and Canadian Imperial

Considering the 90-day investment horizon Banco De is expected to generate 1.41 times less return on investment than Canadian Imperial. In addition to that, Banco De is 1.21 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 0.07 per unit of volatility. If you would invest  3,937  in Canadian Imperial Bank on January 26, 2024 and sell it today you would earn a total of  817.00  from holding Canadian Imperial Bank or generate 20.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Banco De Chile  vs.  Canadian Imperial Bank

Banco De Chile

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Banco De may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Canadian Imperial Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Canadian Imperial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Banco De and Canadian Imperial

The main advantage of trading using opposite Banco De and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco De 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.

The idea behind Banco De Chile and Canadian 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 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.