Correlation Between Salesforce and Canadian Imperial

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

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

Diversification Opportunities for Salesforce and Canadian Imperial

0.49

Correlation Coefficient

Salesforce  Canadian Imperial

Very weak diversification

The 3 months correlation between Salesforce and Canadian is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce 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 Salesforce 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 Salesforce 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 Salesforce i.e., Salesforce and Canadian Imperial go up and down completely randomly.

Pair Corralation between Salesforce and Canadian Imperial

Considering the 90-day investment horizon Salesforce is expected to under-perform the Canadian Imperial. In addition to that, Salesforce is 2.02 times more volatile than Canadian Imperial Bank. It trades about -0.16 of its total potential returns per unit of risk. Canadian Imperial Bank is currently generating about -0.15 per unit of volatility. If you would invest  4,945  in Canadian Imperial Bank on February 4, 2024 and sell it today you would lose (157.00) from holding Canadian Imperial Bank or give up 3.17% of portfolio value over 90 days.

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

Salesforce  vs.  Canadian Imperial Bank

Salesforce

Risk-Adjusted Performance

0 of 100

Very Weak

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

Canadian Imperial Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Canadian Imperial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Salesforce and Canadian Imperial

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

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.