Correlation Between IShares NASDAQ and CIBC Equity

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Can any of the company-specific risk be diversified away by investing in both IShares NASDAQ and CIBC Equity 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 IShares NASDAQ and CIBC Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares NASDAQ 100 and CIBC Equity Index, you can compare the effects of market volatilities on IShares NASDAQ and CIBC Equity 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 IShares NASDAQ with a short position of CIBC Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and CIBC Equity.

Diversification Opportunities for IShares NASDAQ and CIBC Equity

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between IShares and CIBC is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 and CIBC Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Equity Index and IShares NASDAQ 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 iShares NASDAQ 100 are associated (or correlated) with CIBC Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Equity Index has no effect on the direction of IShares NASDAQ i.e., IShares NASDAQ and CIBC Equity go up and down completely randomly.

Pair Corralation between IShares NASDAQ and CIBC Equity

Assuming the 90 days trading horizon iShares NASDAQ 100 is expected to generate 1.03 times more return on investment than CIBC Equity. However, IShares NASDAQ is 1.03 times more volatile than CIBC Equity Index. It trades about 0.36 of its potential returns per unit of risk. CIBC Equity Index is currently generating about 0.27 per unit of risk. If you would invest  4,667  in iShares NASDAQ 100 on April 23, 2025 and sell it today you would earn a total of  1,090  from holding iShares NASDAQ 100 or generate 23.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

iShares NASDAQ 100  vs.  CIBC Equity Index

 Performance 
       Timeline  
iShares NASDAQ 100 

Risk-Adjusted Performance

Strong

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in iShares NASDAQ 100 are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares NASDAQ displayed solid returns over the last few months and may actually be approaching a breakup point.
CIBC Equity Index 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Equity Index are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, CIBC Equity displayed solid returns over the last few months and may actually be approaching a breakup point.

IShares NASDAQ and CIBC Equity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares NASDAQ and CIBC Equity

The main advantage of trading using opposite IShares NASDAQ and CIBC Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares NASDAQ position performs unexpectedly, CIBC Equity 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 Equity will offset losses from the drop in CIBC Equity's long position.
The idea behind iShares NASDAQ 100 and CIBC Equity Index 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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