Correlation Between Dow Jones and Canaan
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Canaan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Canaan Inc, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Canaan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Canaan.
Diversification Opportunities for Dow Jones and Canaan
Poor diversification
The 3 months correlation between Dow and Canaan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Canaan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaan Inc and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Canaan go up and down completely randomly.
Pair Corralation between Dow Jones and Canaan
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.25 times less return on investment than Canaan. But when comparing it to its historical volatility, Dow Jones Industrial is 10.6 times less risky than Canaan. It trades about 0.11 of its potential returns per unit of risk. Canaan Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 247.00 in Canaan Inc on August 31, 2024 and sell it today you would lose (65.00) from holding Canaan Inc or give up 26.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Canaan Inc
Performance |
| Timeline |
Dow Jones and Canaan Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Canaan Inc
Pair trading matchups for Canaan
Pair Trading with Dow Jones and Canaan
The main advantage of trading using opposite Dow Jones and Canaan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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