Correlation Between CIBC Premium and CIBC Core

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

By analyzing existing cross correlation between CIBC Premium Cash and CIBC Core Fixed, you can compare the effects of market volatilities on CIBC Premium and CIBC Core 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 CIBC Premium with a short position of CIBC Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of CIBC Premium and CIBC Core.

Diversification Opportunities for CIBC Premium and CIBC Core

-0.23

Correlation Coefficient

CIBC Premium  CIBC Core

Very good diversification

The 3 months correlation between CIBC and CIBC is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding CIBC Premium Cash and CIBC Core Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Core Fixed and CIBC Premium 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 CIBC Premium Cash are associated (or correlated) with CIBC Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Core Fixed has no effect on the direction of CIBC Premium i.e., CIBC Premium and CIBC Core go up and down completely randomly.

Pair Corralation between CIBC Premium and CIBC Core

Assuming the 90 days trading horizon CIBC Premium is expected to generate 1.46 times less return on investment than CIBC Core. But when comparing it to its historical volatility, CIBC Premium Cash is 6.51 times less risky than CIBC Core. It trades about 0.39 of its potential returns per unit of risk. CIBC Core Fixed is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,760  in CIBC Core Fixed on April 20, 2025 and sell it today you would earn a total of  16.00  from holding CIBC Core Fixed or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.44%
Values	Daily Returns

CIBC Premium Cash  vs.  CIBC Core Fixed

CIBC Premium Cash

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Premium Cash are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Premium is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

CIBC Core Fixed

Risk-Adjusted Performance

Modest

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

Pair Trading with CIBC Premium and CIBC Core

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

The idea behind CIBC Premium Cash and CIBC Core Fixed 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.