Correlation Between Canaan and Credo Technology

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

By analyzing existing cross correlation between Canaan Inc and Credo Technology Group, you can compare the effects of market volatilities on Canaan and Credo Technology 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 Credo Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canaan and Credo Technology.

Diversification Opportunities for Canaan and Credo Technology

0.26

Correlation Coefficient

Canaan  Credo Technology

Modest diversification

The 3 months correlation between Canaan and Credo is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and Credo Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Technology 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 Credo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Technology has no effect on the direction of Canaan i.e., Canaan and Credo Technology go up and down completely randomly.

Pair Corralation between Canaan and Credo Technology

Considering the 90-day investment horizon Canaan Inc is expected to under-perform the Credo Technology. In addition to that, Canaan is 1.16 times more volatile than Credo Technology Group. It trades about -0.22 of its total potential returns per unit of risk. Credo Technology Group is currently generating about -0.05 per unit of volatility. If you would invest  5,815  in Credo Technology Group on November 29, 2024 and sell it today you would lose (555.00) from holding Credo Technology Group or give up 9.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Canaan Inc  vs.  Credo Technology Group

Canaan Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canaan Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Credo Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Credo Technology Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Credo Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canaan and Credo Technology

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

The idea behind Canaan Inc and Credo Technology Group 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.