Correlation Between Sunrun and Xinyi Solar

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

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

Diversification Opportunities for Sunrun and Xinyi Solar

-0.18

Correlation Coefficient

Sunrun  Xinyi Solar

Good diversification

The 3 months correlation between Sunrun and Xinyi is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sunrun Inc and Xinyi Solar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinyi Solar Holdings and Sunrun 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 Sunrun Inc are associated (or correlated) with Xinyi Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinyi Solar Holdings has no effect on the direction of Sunrun i.e., Sunrun and Xinyi Solar go up and down completely randomly.

Pair Corralation between Sunrun and Xinyi Solar

Assuming the 90 days horizon Sunrun Inc is expected to under-perform the Xinyi Solar. In addition to that, Sunrun is 1.18 times more volatile than Xinyi Solar Holdings. It trades about -0.01 of its total potential returns per unit of risk. Xinyi Solar Holdings is currently generating about 0.02 per unit of volatility. If you would invest  47.00  in Xinyi Solar Holdings on September 12, 2024 and sell it today you would lose (3.00) from holding Xinyi Solar Holdings or give up 6.38% of portfolio value over 90 days.

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

Sunrun Inc  vs.  Xinyi Solar Holdings

Sunrun Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunrun Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Xinyi Solar Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xinyi Solar Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xinyi Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunrun and Xinyi Solar

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

The idea behind Sunrun Inc and Xinyi Solar Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.