Correlation Between Canon and PAX Global

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

By analyzing existing cross correlation between Canon Inc and PAX Global Technology, you can compare the effects of market volatilities on Canon and PAX Global 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 Canon with a short position of PAX Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canon and PAX Global.

Diversification Opportunities for Canon and PAX Global

0.33

Correlation Coefficient

Canon  PAX Global

Weak diversification

The 3 months correlation between Canon and PAX is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Canon Inc and PAX Global Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAX Global Technology and Canon 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 Canon Inc are associated (or correlated) with PAX Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAX Global Technology has no effect on the direction of Canon i.e., Canon and PAX Global go up and down completely randomly.

Pair Corralation between Canon and PAX Global

Assuming the 90 days trading horizon Canon Inc is expected to under-perform the PAX Global. But the stock apears to be less risky and, when comparing its historical volatility, Canon Inc is 1.67 times less risky than PAX Global. The stock trades about -0.04 of its potential returns per unit of risk. The PAX Global Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  61.00  in PAX Global Technology on December 27, 2024 and sell it today you would lose (4.00) from holding PAX Global Technology or give up 6.56% of portfolio value over 90 days.

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

Canon Inc  vs.  PAX Global Technology

Canon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

PAX Global Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days PAX Global Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PAX Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Canon and PAX Global

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

The idea behind Canon Inc and PAX Global Technology 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.