Correlation Between IMPERIAL TOBACCO and CDN IMPERIAL

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

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

Diversification Opportunities for IMPERIAL TOBACCO and CDN IMPERIAL

-0.41

Correlation Coefficient

IMPERIAL TOBACCO  CDN IMPERIAL

Very good diversification

The 3 months correlation between IMPERIAL and CDN is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and CDN IMPERIAL go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and CDN IMPERIAL

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to under-perform the CDN IMPERIAL. In addition to that, IMPERIAL TOBACCO is 1.71 times more volatile than CDN IMPERIAL BANK. It trades about -0.01 of its total potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about 0.39 per unit of volatility. If you would invest  5,132  in CDN IMPERIAL BANK on April 20, 2025 and sell it today you would earn a total of  1,128  from holding CDN IMPERIAL BANK or generate 21.98% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  CDN IMPERIAL BANK

IMPERIAL TOBACCO

Risk-Adjusted Performance

Very Weak

Over the last 90 days IMPERIAL TOBACCO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, IMPERIAL TOBACCO is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CDN IMPERIAL BANK

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, CDN IMPERIAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IMPERIAL TOBACCO and CDN IMPERIAL

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

The idea behind IMPERIAL TOBACCO and CDN 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.