Correlation Between Canaan and 3D Systems

Can any of the company-specific risk be diversified away by investing in both Canaan and 3D Systems 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 3D Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canaan Inc and 3D Systems, you can compare the effects of market volatilities on Canaan and 3D Systems 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 3D Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canaan and 3D Systems.

Diversification Opportunities for Canaan and 3D Systems

0.84

Correlation Coefficient

Canaan  3D Systems

Very poor diversification

The 3 months correlation between Canaan and DDD is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and 3D Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3D Systems 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 3D Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3D Systems has no effect on the direction of Canaan i.e., Canaan and 3D Systems go up and down completely randomly.

Pair Corralation between Canaan and 3D Systems

Considering the 90-day investment horizon Canaan Inc is expected to under-perform the 3D Systems. In addition to that, Canaan is 3.39 times more volatile than 3D Systems. It trades about -0.17 of its total potential returns per unit of risk. 3D Systems is currently generating about -0.21 per unit of volatility. If you would invest  407.00  in 3D Systems on February 4, 2024 and sell it today you would lose (45.00) from holding 3D Systems or give up 11.06% of portfolio value over 90 days.

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

Canaan Inc  vs.  3D Systems

Canaan Inc

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, Canaan is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

3D Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 3D Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Canaan and 3D Systems

The main advantage of trading using opposite Canaan and 3D Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canaan position performs unexpectedly, 3D Systems 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 3D Systems will offset losses from the drop in 3D Systems' long position.

The idea behind Canaan Inc and 3D Systems 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.