Correlation Between Canaan and D Wave
Can any of the company-specific risk be diversified away by investing in both Canaan and D Wave 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 Canaan and D Wave into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canaan Inc and D Wave Quantum, you can compare the effects of market volatilities on Canaan and D Wave 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 Canaan with a short position of D Wave. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canaan and D Wave.
Diversification Opportunities for Canaan and D Wave
Very poor diversification
The 3 months correlation between Canaan and QBTS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and D Wave Quantum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on D Wave Quantum and Canaan 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 Canaan Inc are associated (or correlated) with D Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of D Wave Quantum has no effect on the direction of Canaan i.e., Canaan and D Wave go up and down completely randomly.
Pair Corralation between Canaan and D Wave
Considering the 90-day investment horizon Canaan is expected to generate 1.72 times less return on investment than D Wave. But when comparing it to its historical volatility, Canaan Inc is 1.11 times less risky than D Wave. It trades about 0.03 of its potential returns per unit of risk. D Wave Quantum is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 177.00 in D Wave Quantum on August 27, 2024 and sell it today you would earn a total of 116.00 from holding D Wave Quantum or generate 65.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canaan Inc vs. D Wave Quantum
Performance |
| Timeline |
| Canaan Inc |
| D Wave Quantum |
Canaan and D Wave Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canaan and D Wave
The main advantage of trading using opposite Canaan and D Wave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canaan position performs unexpectedly, D Wave 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 D Wave will offset losses from the drop in D Wave's long position.| Canaan vs. 3D Systems | Canaan vs. NetApp Inc | Canaan vs. Rigetti Computing | Canaan vs. Logitech International SA |
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.
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