Correlation Between CIBC Core and Franklin Canadian

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

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

Diversification Opportunities for CIBC Core and Franklin Canadian

0.63

Correlation Coefficient

CIBC Core  Franklin Canadian

Poor diversification

The 3 months correlation between CIBC and Franklin is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CIBC Core Fixed and Franklin Canadian Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Canadian Core and CIBC Core 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 Core Fixed are associated (or correlated) with Franklin Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Canadian Core has no effect on the direction of CIBC Core i.e., CIBC Core and Franklin Canadian go up and down completely randomly.

Pair Corralation between CIBC Core and Franklin Canadian

Assuming the 90 days trading horizon CIBC Core Fixed is expected to generate 0.56 times more return on investment than Franklin Canadian. However, CIBC Core Fixed is 1.79 times less risky than Franklin Canadian. It trades about 0.08 of its potential returns per unit of risk. Franklin Canadian Core is currently generating about 0.01 per unit of risk. If you would invest  1,764  in CIBC Core Fixed on April 22, 2025 and sell it today you would earn a total of  15.00  from holding CIBC Core Fixed or generate 0.85% return on investment over 90 days.

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

CIBC Core Fixed  vs.  Franklin Canadian Core

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.

Franklin Canadian Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Canadian Core has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Franklin Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CIBC Core and Franklin Canadian

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

The idea behind CIBC Core Fixed and Franklin Canadian Core 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.