Correlation Between Canadian Imperial and Banco Santander

Can any of the company-specific risk be diversified away by investing in both Canadian Imperial and Banco Santander 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 Banco Santander 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 Banco Santander SA, you can compare the effects of market volatilities on Canadian Imperial and Banco Santander 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 Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Imperial and Banco Santander.

Diversification Opportunities for Canadian Imperial and Banco Santander

-0.79

Correlation Coefficient

Canadian Imperial  Banco Santander

Pay attention - limited upside

The 3 months correlation between Canadian and Banco is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Banco Santander go up and down completely randomly.

Pair Corralation between Canadian Imperial and Banco Santander

Allowing for the 90-day total investment horizon Canadian Imperial Bank is expected to under-perform the Banco Santander. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Imperial Bank is 1.93 times less risky than Banco Santander. The stock trades about -0.06 of its potential returns per unit of risk. The Banco Santander SA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  495.00  in Banco Santander SA on January 19, 2025 and sell it today you would earn a total of  178.00  from holding Banco Santander SA or generate 35.96% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Banco Santander SA

Canadian Imperial Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian Imperial Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Canadian Imperial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Banco Santander SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Banco Santander displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Imperial and Banco Santander

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

The idea behind Canadian Imperial Bank and Banco Santander SA 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.