Correlation Between Cisco Systems and Canaan
Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and Canaan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Canaan Inc, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of Canaan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Canaan.
Diversification Opportunities for Cisco Systems and Canaan
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and Canaan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Canaan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaan Inc and Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and Canaan go up and down completely randomly.
Pair Corralation between Cisco Systems and Canaan
Given the investment horizon of 90 days Cisco Systems is expected to generate 20.67 times less return on investment than Canaan. But when comparing it to its historical volatility, Cisco Systems is 11.2 times less risky than Canaan. It trades about 0.16 of its potential returns per unit of risk. Canaan Inc is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 97.00 in Canaan Inc on August 24, 2024 and sell it today you would earn a total of 96.00 from holding Canaan Inc or generate 98.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Canaan Inc
Performance |
| Timeline |
| Cisco Systems |
| Canaan Inc |
Cisco Systems and Canaan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Canaan
The main advantage of trading using opposite Cisco Systems and Canaan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.| Cisco Systems vs. Eshallgo Class A | Cisco Systems vs. Amtech Systems | Cisco Systems vs. Gold Fields Ltd | Cisco Systems vs. Aegean Airlines 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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