Correlation Between Canadian Imperial and B of A

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

Diversification Opportunities for Canadian Imperial and B of A

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Canadian and B of A is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Bank Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of America 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 B of A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of America has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and B of A go up and down completely randomly.

Pair Corralation between Canadian Imperial and B of A

Allowing for the 90-day total investment horizon Canadian Imperial Bank is expected to under-perform the B of A. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Imperial Bank is 1.12 times less risky than B of A. The stock trades about -0.31 of its potential returns per unit of risk. The Bank Of America is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  3,390  in Bank Of America on June 28, 2022 and sell it today you would lose (287.00)  from holding Bank Of America or give up 8.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Canadian Imperial Bank  vs.  Bank Of America

 Performance (%) 
       Timeline  
Canadian Imperial Bank 
Canadian Performance
0 of 100
Over the last 90 days Canadian Imperial Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's primary indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Canadian Price Channel

Bank Of America 
B of A Performance
0 of 100
Over the last 90 days Bank Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

Canadian Imperial and B of A Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Canadian Imperial and B of A

The main advantage of trading using opposite Canadian Imperial and B of A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Imperial position performs unexpectedly, B of A 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 B of A will offset losses from the drop in B of A's long position.
Canadian Imperial vs. Kibush Capital Corp
The idea behind Canadian Imperial Bank and Bank Of America 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.
B of A vs. Kibush Capital Corp
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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