Correlation Between Canaan and Super Micro

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

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

Diversification Opportunities for Canaan and Super Micro

-0.42

Correlation Coefficient

Canaan  Super Micro

Very good diversification

The 3 months correlation between Canaan and Super is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and Super Micro Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Micro Computer 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 Super Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Micro Computer has no effect on the direction of Canaan i.e., Canaan and Super Micro go up and down completely randomly.

Pair Corralation between Canaan and Super Micro

Considering the 90-day investment horizon Canaan Inc is expected to under-perform the Super Micro. But the stock apears to be less risky and, when comparing its historical volatility, Canaan Inc is 1.16 times less risky than Super Micro. The stock trades about -0.19 of its potential returns per unit of risk. The Super Micro Computer is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,068  in Super Micro Computer on December 28, 2024 and sell it today you would earn a total of  404.00  from holding Super Micro Computer or generate 13.17% 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.  Super Micro Computer

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.

Super Micro Computer

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Super Micro Computer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Super Micro demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canaan and Super Micro

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

The idea behind Canaan Inc and Super Micro Computer 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.