Correlation Between Pure Storage and Canaan

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

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

Diversification Opportunities for Pure Storage and Canaan

0.82

Correlation Coefficient

Pure Storage  Canaan

Very poor diversification

The 3 months correlation between Pure and Canaan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Pure Storage and Canaan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaan Inc and Pure Storage 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 Pure Storage are associated (or correlated) with Canaan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaan Inc has no effect on the direction of Pure Storage i.e., Pure Storage and Canaan go up and down completely randomly.

Pair Corralation between Pure Storage and Canaan

Given the investment horizon of 90 days Pure Storage is expected to generate 0.53 times more return on investment than Canaan. However, Pure Storage is 1.87 times less risky than Canaan. It trades about -0.11 of its potential returns per unit of risk. Canaan Inc is currently generating about -0.19 per unit of risk. If you would invest  6,248  in Pure Storage on December 28, 2024 and sell it today you would lose (1,404) from holding Pure Storage or give up 22.47% of portfolio value over 90 days.

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

Pure Storage  vs.  Canaan Inc

Pure Storage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pure Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Pure Storage and Canaan

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

The idea behind Pure Storage and Canaan 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.