Correlation Between PAX Global and Canon

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

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

Diversification Opportunities for PAX Global and Canon

0.54

Correlation Coefficient

PAX Global  Canon

Very weak diversification

The 3 months correlation between PAX and Canon is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding PAX Global Technology and Canon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canon Inc and PAX Global 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 PAX Global Technology are associated (or correlated) with Canon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canon Inc has no effect on the direction of PAX Global i.e., PAX Global and Canon go up and down completely randomly.

Pair Corralation between PAX Global and Canon

Assuming the 90 days horizon PAX Global Technology is expected to generate 3.81 times more return on investment than Canon. However, PAX Global is 3.81 times more volatile than Canon Inc. It trades about 0.09 of its potential returns per unit of risk. Canon Inc is currently generating about 0.04 per unit of risk. 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

PAX Global Technology  vs.  Canon Inc

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.

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.

Pair Trading with PAX Global and Canon

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

The idea behind PAX Global Technology and Canon Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.