Can any of the company-specific risk be diversified away by investing in both Canaan and Diodes Incorporated 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 Diodes Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canaan Inc and Diodes Incorporated, you can compare the effects of market volatilities on Canaan and Diodes Incorporated 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 Diodes Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canaan and Diodes Incorporated.
Diversification Opportunities for Canaan and Diodes Incorporated
The 3 months correlation between Canaan and Diodes is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated 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 Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of Canaan i.e., Canaan and Diodes Incorporated go up and down completely randomly.
Pair Corralation between Canaan and Diodes Incorporated
Considering the 90-day investment horizon Canaan Inc is expected to generate 2.44 times more return on investment than Diodes Incorporated. However, Canaan is 2.44 times more volatile than Diodes Incorporated. It trades about 0.12 of its potential returns per unit of risk. Diodes Incorporated is currently generating about 0.03 per unit of risk. If you would invest 88.00 in Canaan Inc on March 6, 2024 and sell it today you would earn a total of 12.00 from holding Canaan Inc or generate 13.64% return on investment over 90 days.
Over the last 90 days Canaan Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Diodes Incorporated exhibited solid returns over the last few months and may actually be approaching a breakup point.