Correlation Between HP and Canaan
Can any of the company-specific risk be diversified away by investing in both HP 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 HP and Canaan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Canaan Inc, you can compare the effects of market volatilities on HP 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 HP with a short position of Canaan. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Canaan.
Diversification Opportunities for HP and Canaan
Very weak diversification
The 3 months correlation between HP and Canaan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Canaan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaan Inc and HP 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 HP Inc 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 HP i.e., HP and Canaan go up and down completely randomly.
Pair Corralation between HP and Canaan
Considering the 90-day investment horizon HP is expected to generate 2.5 times less return on investment than Canaan. But when comparing it to its historical volatility, HP Inc is 4.24 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 199.00 in Canaan Inc on August 27, 2024 and sell it today you would lose (2.00) from holding Canaan Inc or give up 1.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Canaan Inc
Performance |
| Timeline |
| HP Inc |
| Canaan Inc |
HP and Canaan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Canaan
The main advantage of trading using opposite HP and Canaan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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.The idea behind HP Inc and Canaan Inc 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.| 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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