Correlation Between Canaan and Daqo New

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

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

Diversification Opportunities for Canaan and Daqo New

-0.4

Correlation Coefficient

Canaan  Daqo New

Very good diversification

The 3 months correlation between Canaan and Daqo is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and Daqo New Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daqo New Energy 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 Daqo New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daqo New Energy has no effect on the direction of Canaan i.e., Canaan and Daqo New go up and down completely randomly.

Pair Corralation between Canaan and Daqo New

Considering the 90-day investment horizon Canaan Inc is expected to under-perform the Daqo New. In addition to that, Canaan is 1.64 times more volatile than Daqo New Energy. It trades about -0.18 of its total potential returns per unit of risk. Daqo New Energy is currently generating about 0.03 per unit of volatility. If you would invest  1,872  in Daqo New Energy on December 10, 2024 and sell it today you would earn a total of  34.00  from holding Daqo New Energy or generate 1.82% return on investment over 90 days.

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

Canaan Inc  vs.  Daqo New Energy

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Daqo New Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daqo New Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Daqo New may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Canaan and Daqo New

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

The idea behind Canaan Inc and Daqo New Energy 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.