Correlation Between Canon and DOCDATA

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

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

Diversification Opportunities for Canon and DOCDATA

-0.39

Correlation Coefficient

Canon  DOCDATA

Very good diversification

The 3 months correlation between Canon and DOCDATA is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Canon Inc and DOCDATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOCDATA and Canon 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 Canon Inc are associated (or correlated) with DOCDATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOCDATA has no effect on the direction of Canon i.e., Canon and DOCDATA go up and down completely randomly.

Pair Corralation between Canon and DOCDATA

Assuming the 90 days trading horizon Canon Inc is expected to generate 0.52 times more return on investment than DOCDATA. However, Canon Inc is 1.92 times less risky than DOCDATA. It trades about 0.02 of its potential returns per unit of risk. DOCDATA is currently generating about -0.06 per unit of risk. If you would invest  3,072  in Canon Inc on September 12, 2024 and sell it today you would earn a total of  40.00  from holding Canon Inc or generate 1.3% return on investment over 90 days.

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

Canon Inc  vs.  DOCDATA

Canon Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canon Inc are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

DOCDATA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOCDATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Canon and DOCDATA

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

The idea behind Canon Inc and DOCDATA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.