Correlation Between Applied Materials and Canaan
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Canaan 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 Applied Materials and Canaan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Canaan Inc, you can compare the effects of market volatilities on Applied Materials and Canaan 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 Applied Materials with a short position of Canaan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Canaan.
Diversification Opportunities for Applied Materials and Canaan
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and Canaan is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Canaan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaan Inc and Applied Materials 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 Applied Materials are associated (or correlated) with Canaan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaan Inc has no effect on the direction of Applied Materials i.e., Applied Materials and Canaan go up and down completely randomly.
Pair Corralation between Applied Materials and Canaan
Given the investment horizon of 90 days Applied Materials is expected to generate 1.31 times less return on investment than Canaan. But when comparing it to its historical volatility, Applied Materials is 2.79 times less risky than Canaan. It trades about 0.06 of its potential returns per unit of risk. Canaan Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 245.00 in Canaan Inc on August 27, 2024 and sell it today you would lose (48.00) from holding Canaan Inc or give up 19.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Canaan Inc
Performance |
| Timeline |
| Applied Materials |
| Canaan Inc |
Applied Materials and Canaan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Canaan
The main advantage of trading using opposite Applied Materials and Canaan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Canaan 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 Canaan will offset losses from the drop in Canaan's long position.| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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