Correlation Between Canadian Imperial and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Canadian Imperial and HSBC Holdings 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 HSBC Holdings 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 HSBC Holdings PLC, you can compare the effects of market volatilities on Canadian Imperial and HSBC Holdings 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 HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Imperial and HSBC Holdings.
Diversification Opportunities for Canadian Imperial and HSBC Holdings
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and HSBC is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and HSBC Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings PLC 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 HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings PLC has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and HSBC Holdings go up and down completely randomly.
Pair Corralation between Canadian Imperial and HSBC Holdings
Allowing for the 90-day total investment horizon Canadian Imperial Bank is expected to under-perform the HSBC Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Imperial Bank is 1.35 times less risky than HSBC Holdings. The stock trades about -0.21 of its potential returns per unit of risk. The HSBC Holdings PLC is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,970 in HSBC Holdings PLC on January 26, 2024 and sell it today you would earn a total of 199.00 from holding HSBC Holdings PLC or generate 5.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Imperial Bank vs. HSBC Holdings PLC
Performance |
| Timeline |
| Canadian Imperial Bank |
| HSBC Holdings PLC |
Canadian Imperial and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Imperial and HSBC Holdings
The main advantage of trading using opposite Canadian Imperial and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Imperial position performs unexpectedly, HSBC Holdings 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 HSBC Holdings will offset losses from the drop in HSBC Holdings' long position.| Canadian Imperial vs. Bank of Montreal | Canadian Imperial vs. Toronto Dominion Bank | Canadian Imperial vs. Royal Bank of | Canadian Imperial vs. Citigroup |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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