Correlation Between Quantum and Canaan

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

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

Diversification Opportunities for Quantum and Canaan

0.85

Correlation Coefficient

Quantum  Canaan

Very poor diversification

The 3 months correlation between Quantum and Canaan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Quantum and Canaan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaan Inc and Quantum 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 Quantum 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 Quantum i.e., Quantum and Canaan go up and down completely randomly.

Pair Corralation between Quantum and Canaan

Given the investment horizon of 90 days Quantum is expected to generate 2.34 times more return on investment than Canaan. However, Quantum is 2.34 times more volatile than Canaan Inc. It trades about 0.1 of its potential returns per unit of risk. Canaan Inc is currently generating about 0.13 per unit of risk. If you would invest  786.00  in Quantum on September 18, 2024 and sell it today you would earn a total of  1,592  from holding Quantum or generate 202.54% return on investment over 90 days.

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

Quantum  vs.  Canaan Inc

Quantum

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Canaan Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canaan Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Canaan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quantum and Canaan

The main advantage of trading using opposite Quantum and Canaan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantum 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 Quantum 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.