Correlation Between Canadian Solar and SunPower
Can any of the company-specific risk be diversified away by investing in both Canadian Solar and SunPower 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 Canadian Solar and SunPower into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Solar and SunPower, you can compare the effects of market volatilities on Canadian Solar and SunPower 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 Canadian Solar with a short position of SunPower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Solar and SunPower.
Diversification Opportunities for Canadian Solar and SunPower
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Canadian and SunPower is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and SunPower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunPower and Canadian Solar 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 Canadian Solar are associated (or correlated) with SunPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunPower has no effect on the direction of Canadian Solar i.e., Canadian Solar and SunPower go up and down completely randomly.
Pair Corralation between Canadian Solar and SunPower
Given the investment horizon of 90 days Canadian Solar is expected to generate 0.81 times more return on investment than SunPower. However, Canadian Solar is 1.23 times less risky than SunPower. It trades about -0.22 of its potential returns per unit of risk. SunPower is currently generating about -0.23 per unit of risk. If you would invest 1,798 in Canadian Solar on January 26, 2024 and sell it today you would lose (348.00) from holding Canadian Solar or give up 19.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Solar vs. SunPower
Performance |
| Timeline |
| Canadian Solar |
| SunPower |
Canadian Solar and SunPower Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Solar and SunPower
The main advantage of trading using opposite Canadian Solar and SunPower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Solar position performs unexpectedly, SunPower 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 SunPower will offset losses from the drop in SunPower's long position.The idea behind Canadian Solar and SunPower 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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