Correlation Between Canaan and Pure Storage

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

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

Diversification Opportunities for Canaan and Pure Storage

0.13

Correlation Coefficient

Canaan  Pure Storage

Average diversification

The 3 months correlation between Canaan and Pure is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and Pure Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Storage 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 Pure Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage has no effect on the direction of Canaan i.e., Canaan and Pure Storage go up and down completely randomly.

Pair Corralation between Canaan and Pure Storage

Considering the 90-day investment horizon Canaan Inc is expected to under-perform the Pure Storage. In addition to that, Canaan is 1.97 times more volatile than Pure Storage. It trades about -0.03 of its total potential returns per unit of risk. Pure Storage is currently generating about 0.08 per unit of volatility. If you would invest  5,299  in Pure Storage on November 28, 2024 and sell it today you would earn a total of  831.00  from holding Pure Storage or generate 15.68% return on investment over 90 days.

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

Canaan Inc  vs.  Pure Storage

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.

Pure Storage

Risk-Adjusted Performance

Modest

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

Pair Trading with Canaan and Pure Storage

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

The idea behind Canaan Inc and Pure Storage 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.