Correlation Between Valmont Industries and Canadian Solar

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

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

Diversification Opportunities for Valmont Industries and Canadian Solar

0.0

Correlation Coefficient

Valmont Industries  Canadian Solar

Pay attention - limited upside

The 3 months correlation between Valmont and Canadian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Valmont Industries and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and Valmont Industries 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 Valmont Industries are associated (or correlated) with Canadian Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Solar has no effect on the direction of Valmont Industries i.e., Valmont Industries and Canadian Solar go up and down completely randomly.

Pair Corralation between Valmont Industries and Canadian Solar

Considering the 90-day investment horizon Valmont Industries is expected to under-perform the Canadian Solar. But the stock apears to be less risky and, when comparing its historical volatility, Valmont Industries is 5.31 times less risky than Canadian Solar. The stock trades about -0.08 of its potential returns per unit of risk. The Canadian Solar is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,570  in Canadian Solar on March 11, 2024 and sell it today you would earn a total of  169.00  from holding Canadian Solar or generate 10.76% return on investment over 90 days.

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

Valmont Industries  vs.  Canadian Solar

Valmont Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, Valmont Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Canadian Solar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Solar has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Valmont Industries and Canadian Solar

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

The idea behind Valmont Industries and Canadian Solar 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..