Correlation Between Canon and NetApp

Can any of the company-specific risk be diversified away by investing in both Canon and NetApp 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 Canon and NetApp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canon Inc ADR and NetApp Inc, you can compare the effects of market volatilities on Canon and NetApp 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 Canon with a short position of NetApp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canon and NetApp.

Diversification Opportunities for Canon and NetApp

-0.51

Correlation Coefficient

Canon  NetApp

Excellent diversification

The 3 months correlation between Canon and NetApp is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Canon Inc ADR and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc and Canon 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 Canon Inc ADR are associated (or correlated) with NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Canon i.e., Canon and NetApp go up and down completely randomly.

Pair Corralation between Canon and NetApp

If you would invest  7,106  in NetApp Inc on January 25, 2024 and sell it today you would earn a total of  2,900  from holding NetApp Inc or generate 40.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.81%
Values	Daily Returns

Canon Inc ADR  vs.  NetApp Inc

Canon Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canon Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Canon is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

NetApp Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, NetApp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canon and NetApp

The main advantage of trading using opposite Canon and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canon position performs unexpectedly, NetApp 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 NetApp will offset losses from the drop in NetApp's long position.

The idea behind Canon Inc ADR and NetApp 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.