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

0.54

Correlation Coefficient

Canon  PAX Global

Very weak diversification

The 3 months correlation between Canon and PAX is 0.54. 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 is expected to generate 8.5 times less return on investment than PAX Global. But when comparing it to its historical volatility, Canon Inc is 3.81 times less risky than PAX Global. It trades about 0.04 of its potential returns per unit of risk. PAX Global Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  47.00  in PAX Global Technology on September 16, 2024 and sell it today you would earn a total of  15.00  from holding PAX Global Technology or generate 31.91% return on investment over 90 days.

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

Canon Inc  vs.  PAX Global Technology

Canon Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canon Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PAX Global Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PAX Global Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PAX Global reported solid returns over the last few months and may actually be approaching a breakup point.

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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.