Correlation Between Canadian Imperial and Orix Corp

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

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

Diversification Opportunities for Canadian Imperial and Orix Corp

0.85

Correlation Coefficient

Canadian Imperial  Orix Corp

Very poor diversification

The 3 months correlation between Canadian and Orix is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Orix Corp Ads in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orix Corp Ads and Canadian Imperial 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 Canadian Imperial Bank are associated (or correlated) with Orix Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orix Corp Ads has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Orix Corp go up and down completely randomly.

Pair Corralation between Canadian Imperial and Orix Corp

Allowing for the 90-day total investment horizon Canadian Imperial Bank is expected to generate 0.73 times more return on investment than Orix Corp. However, Canadian Imperial Bank is 1.37 times less risky than Orix Corp. It trades about -0.26 of its potential returns per unit of risk. Orix Corp Ads is currently generating about -0.38 per unit of risk. If you would invest  4,967  in Canadian Imperial Bank on January 20, 2024 and sell it today you would lose (245.00) from holding Canadian Imperial Bank or give up 4.93% of portfolio value over 90 days.

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

Canadian Imperial Bank  vs.  Orix Corp Ads

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.

Orix Corp Ads

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Orix Corp Ads are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Orix Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Canadian Imperial and Orix Corp

The main advantage of trading using opposite Canadian Imperial and Orix Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Imperial position performs unexpectedly, Orix Corp 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 Orix Corp will offset losses from the drop in Orix Corp's long position.

The idea behind Canadian Imperial Bank and Orix Corp Ads 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.