Correlation Between Canaan and Seiko Epson

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

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

Diversification Opportunities for Canaan and Seiko Epson

-0.24

Correlation Coefficient

Canaan  Seiko Epson

Very good diversification

The 3 months correlation between Canaan and Seiko is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and Seiko Epson Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seiko Epson Corp 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 Seiko Epson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seiko Epson Corp has no effect on the direction of Canaan i.e., Canaan and Seiko Epson go up and down completely randomly.

Pair Corralation between Canaan and Seiko Epson

Considering the 90-day investment horizon Canaan Inc is expected to generate 9.26 times more return on investment than Seiko Epson. However, Canaan is 9.26 times more volatile than Seiko Epson Corp. It trades about 0.05 of its potential returns per unit of risk. Seiko Epson Corp is currently generating about 0.08 per unit of risk. If you would invest  208.00  in Canaan Inc on September 26, 2024 and sell it today you would lose (2.00) from holding Canaan Inc or give up 0.96% of portfolio value over 90 days.

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

Canaan Inc  vs.  Seiko Epson Corp

Canaan Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canaan Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Canaan displayed solid returns over the last few months and may actually be approaching a breakup point.

Seiko Epson Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seiko Epson Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Seiko Epson is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Canaan and Seiko Epson

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

The idea behind Canaan Inc and Seiko Epson Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.