Correlation Between Invesco ESG and CIBC Active

Can any of the company-specific risk be diversified away by investing in both Invesco ESG and CIBC Active 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 Invesco ESG and CIBC Active into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco ESG NASDAQ and CIBC Active Investment, you can compare the effects of market volatilities on Invesco ESG and CIBC Active 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 Invesco ESG with a short position of CIBC Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco ESG and CIBC Active.

Diversification Opportunities for Invesco ESG and CIBC Active

0.21

Correlation Coefficient

Invesco ESG  CIBC Active

Modest diversification

The 3 months correlation between Invesco and CIBC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Invesco ESG NASDAQ and CIBC Active Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Active Investment and Invesco ESG 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 Invesco ESG NASDAQ are associated (or correlated) with CIBC Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Active Investment has no effect on the direction of Invesco ESG i.e., Invesco ESG and CIBC Active go up and down completely randomly.

Pair Corralation between Invesco ESG and CIBC Active

Assuming the 90 days trading horizon Invesco ESG NASDAQ is expected to generate 4.59 times more return on investment than CIBC Active. However, Invesco ESG is 4.59 times more volatile than CIBC Active Investment. It trades about 0.06 of its potential returns per unit of risk. CIBC Active Investment is currently generating about 0.13 per unit of risk. If you would invest  2,221  in Invesco ESG NASDAQ on March 13, 2024 and sell it today you would earn a total of  61.00  from holding Invesco ESG NASDAQ or generate 2.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.55%
Values	Daily Returns

Invesco ESG NASDAQ  vs.  CIBC Active Investment

Invesco ESG NASDAQ

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco ESG NASDAQ are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Invesco ESG is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

CIBC Active Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Active Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco ESG and CIBC Active

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

The idea behind Invesco ESG NASDAQ and CIBC Active Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.