Correlation Between Canaan and Immersion

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

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

Diversification Opportunities for Canaan and Immersion

0.71

Correlation Coefficient

Canaan  Immersion

Poor diversification

The 3 months correlation between Canaan and Immersion is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and Immersion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immersion and Canaan 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 Canaan Inc are associated (or correlated) with Immersion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Immersion has no effect on the direction of Canaan i.e., Canaan and Immersion go up and down completely randomly.

Pair Corralation between Canaan and Immersion

Considering the 90-day investment horizon Canaan Inc is expected to generate 4.05 times more return on investment than Immersion. However, Canaan is 4.05 times more volatile than Immersion. It trades about 0.22 of its potential returns per unit of risk. Immersion is currently generating about 0.03 per unit of risk. If you would invest  101.00  in Canaan Inc on September 20, 2024 and sell it today you would earn a total of  196.00  from holding Canaan Inc or generate 194.06% return on investment over 90 days.

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

Canaan Inc  vs.  Immersion

Canaan Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canaan Inc are ranked lower than 17 (%) 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.

Immersion

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Immersion are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Immersion is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Canaan and Immersion

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

The idea behind Canaan Inc and Immersion 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.