Correlation Between Canaan and Texas Instruments

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

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

Diversification Opportunities for Canaan and Texas Instruments

-0.54

Correlation Coefficient

Canaan  Texas Instruments

Excellent diversification

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

Pair Corralation between Canaan and Texas Instruments

Considering the 90-day investment horizon Canaan Inc is expected to generate 10.28 times more return on investment than Texas Instruments. However, Canaan is 10.28 times more volatile than Texas Instruments Incorporated. It trades about 0.15 of its potential returns per unit of risk. Texas Instruments Incorporated is currently generating about -0.31 per unit of risk. If you would invest  182.00  in Canaan Inc on September 22, 2024 and sell it today you would earn a total of  50.00  from holding Canaan Inc or generate 27.47% return on investment over 90 days.

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

Canaan Inc  vs.  Texas Instruments Incorporated

Canaan Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canaan Inc are ranked lower than 14 (%) 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.

Texas Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Texas Instruments Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Canaan and Texas Instruments

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

The idea behind Canaan Inc and Texas Instruments Incorporated 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.