Correlation Between Canadian Imperial and East West
Can any of the company-specific risk be diversified away by investing in both Canadian Imperial and East West 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 Canadian Imperial and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Imperial Bank and East West Bancorp, you can compare the effects of market volatilities on Canadian Imperial and East West 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 Canadian Imperial with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Imperial and East West.
Diversification Opportunities for Canadian Imperial and East West
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Canadian and East is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and East West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Bancorp and Canadian Imperial 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 Canadian Imperial Bank are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Bancorp has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and East West go up and down completely randomly.
Pair Corralation between Canadian Imperial and East West
Allowing for the 90-day total investment horizon Canadian Imperial is expected to generate 1.97 times less return on investment than East West. But when comparing it to its historical volatility, Canadian Imperial Bank is 1.6 times less risky than East West. It trades about 0.08 of its potential returns per unit of risk. East West Bancorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,874 in East West Bancorp on January 19, 2024 and sell it today you would earn a total of 2,306 from holding East West Bancorp or generate 47.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Imperial Bank vs. East West Bancorp
Performance |
| Timeline |
| Canadian Imperial Bank |
| East West Bancorp |
Canadian Imperial and East West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Imperial and East West
The main advantage of trading using opposite Canadian Imperial and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Imperial position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.| Canadian Imperial vs. Bank of Montreal | Canadian Imperial vs. Toronto Dominion Bank | Canadian Imperial vs. Royal Bank of | Canadian Imperial vs. Citigroup |
| East West vs. Barclays PLC ADR | East West vs. UBS Group AG | East West vs. ING Group NV | East West vs. Citigroup |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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