Correlation Between Canaan and Semtech

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

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

Diversification Opportunities for Canaan and Semtech

0.8

Correlation Coefficient

Canaan  Semtech

Very poor diversification

The 3 months correlation between Canaan and Semtech is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and Semtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semtech 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 Semtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semtech has no effect on the direction of Canaan i.e., Canaan and Semtech go up and down completely randomly.

Pair Corralation between Canaan and Semtech

Considering the 90-day investment horizon Canaan Inc is expected to under-perform the Semtech. But the stock apears to be less risky and, when comparing its historical volatility, Canaan Inc is 1.18 times less risky than Semtech. The stock trades about -0.2 of its potential returns per unit of risk. The Semtech is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  6,170  in Semtech on December 28, 2024 and sell it today you would lose (2,665) from holding Semtech or give up 43.19% of portfolio value over 90 days.

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

Canaan Inc  vs.  Semtech

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.

Semtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Canaan and Semtech

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

The idea behind Canaan Inc and Semtech 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.