Correlation Between Canaan and STMicroelectronics

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

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

Diversification Opportunities for Canaan and STMicroelectronics

0.35

Correlation Coefficient

Canaan  STMicroelectronics

Weak diversification

The 3 months correlation between Canaan and STMicroelectronics is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Canaan Inc and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Canaan i.e., Canaan and STMicroelectronics go up and down completely randomly.

Pair Corralation between Canaan and STMicroelectronics

Considering the 90-day investment horizon Canaan Inc is expected to generate 2.06 times more return on investment than STMicroelectronics. However, Canaan is 2.06 times more volatile than STMicroelectronics NV. It trades about 0.05 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.05 per unit of risk. If you would invest  69.00  in Canaan Inc on May 25, 2025 and sell it today you would earn a total of  6.00  from holding Canaan Inc or generate 8.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Canaan Inc  vs.  STMicroelectronics NV

Canaan Inc

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Canaan Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Canaan displayed solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, STMicroelectronics may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Canaan and STMicroelectronics

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

The idea behind Canaan Inc and STMicroelectronics NV 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.