Correlation Between CIBC Canadian and CIBC Clean

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

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

Diversification Opportunities for CIBC Canadian and CIBC Clean

0.89

Correlation Coefficient

CIBC Canadian  CIBC Clean

Very poor diversification

The 3 months correlation between CIBC and CIBC is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CIBC Canadian Equity and CIBC Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Clean Energy and CIBC Canadian 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 Canadian Equity are associated (or correlated) with CIBC Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Clean Energy has no effect on the direction of CIBC Canadian i.e., CIBC Canadian and CIBC Clean go up and down completely randomly.

Pair Corralation between CIBC Canadian and CIBC Clean

Assuming the 90 days trading horizon CIBC Canadian Equity is expected to generate 0.4 times more return on investment than CIBC Clean. However, CIBC Canadian Equity is 2.52 times less risky than CIBC Clean. It trades about 0.09 of its potential returns per unit of risk. CIBC Clean Energy is currently generating about -0.04 per unit of risk. If you would invest  2,094  in CIBC Canadian Equity on April 20, 2025 and sell it today you would earn a total of  879.00  from holding CIBC Canadian Equity or generate 41.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

CIBC Canadian Equity  vs.  CIBC Clean Energy

CIBC Canadian Equity

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Canadian Equity are ranked lower than 39 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, CIBC Canadian displayed solid returns over the last few months and may actually be approaching a breakup point.

CIBC Clean Energy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Clean Energy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, CIBC Clean exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CIBC Canadian and CIBC Clean

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

The idea behind CIBC Canadian Equity and CIBC Clean Energy 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.