Correlation Between Financial and CI Preferred

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

By analyzing existing cross correlation between Financial 15 Split and CI Preferred Share, you can compare the effects of market volatilities on Financial and CI Preferred 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 Financial with a short position of CI Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and CI Preferred.

Diversification Opportunities for Financial and CI Preferred

0.87

Correlation Coefficient

Financial  CI Preferred

Very poor diversification

The 3 months correlation between Financial and FPR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and CI Preferred Share in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Preferred Share and Financial 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 Financial 15 Split are associated (or correlated) with CI Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Preferred Share has no effect on the direction of Financial i.e., Financial and CI Preferred go up and down completely randomly.

Pair Corralation between Financial and CI Preferred

Assuming the 90 days trading horizon Financial 15 Split is expected to generate 1.7 times more return on investment than CI Preferred. However, Financial is 1.7 times more volatile than CI Preferred Share. It trades about 0.55 of its potential returns per unit of risk. CI Preferred Share is currently generating about 0.34 per unit of risk. If you would invest  757.00  in Financial 15 Split on April 22, 2025 and sell it today you would earn a total of  235.00  from holding Financial 15 Split or generate 31.04% return on investment over 90 days.

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

Financial 15 Split  vs.  CI Preferred Share

Financial 15 Split

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 42 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

CI Preferred Share

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CI Preferred Share are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI Preferred may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Financial and CI Preferred

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

The idea behind Financial 15 Split and CI Preferred Share 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.