Correlation Between Microchip Technology and Canaan
Can any of the company-specific risk be diversified away by investing in both Microchip Technology 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 Microchip Technology and Canaan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microchip Technology and Canaan Inc, you can compare the effects of market volatilities on Microchip Technology 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 Microchip Technology with a short position of Canaan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and Canaan.
Diversification Opportunities for Microchip Technology and Canaan
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microchip and Canaan is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and Canaan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaan Inc and Microchip Technology 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 Microchip Technology 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 Microchip Technology i.e., Microchip Technology and Canaan go up and down completely randomly.
Pair Corralation between Microchip Technology and Canaan
Given the investment horizon of 90 days Microchip Technology is expected to under-perform the Canaan. But the stock apears to be less risky and, when comparing its historical volatility, Microchip Technology is 5.28 times less risky than Canaan. The stock trades about -0.17 of its potential returns per unit of risk. The Canaan Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 125.00 in Canaan Inc on September 2, 2024 and sell it today you would earn a total of 87.00 from holding Canaan Inc or generate 69.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microchip Technology vs. Canaan Inc
Performance |
| Timeline |
| Microchip Technology |
| Canaan Inc |
Microchip Technology and Canaan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microchip Technology and Canaan
The main advantage of trading using opposite Microchip Technology and Canaan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology 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.| Microchip Technology vs. Texas Instruments Incorporated | Microchip Technology vs. ON Semiconductor | Microchip Technology vs. Analog Devices | Microchip Technology vs. Qorvo Inc |
| 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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