Correlation Between Arteris and Canadian Solar

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

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

Diversification Opportunities for Arteris and Canadian Solar

-0.57

Correlation Coefficient

Arteris  Canadian Solar

Excellent diversification

The 3 months correlation between Arteris and Canadian is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Arteris and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and Arteris 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 Arteris 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 Arteris i.e., Arteris and Canadian Solar go up and down completely randomly.

Pair Corralation between Arteris and Canadian Solar

Considering the 90-day investment horizon Arteris is expected to generate 1.15 times more return on investment than Canadian Solar. However, Arteris is 1.15 times more volatile than Canadian Solar. It trades about 0.06 of its potential returns per unit of risk. Canadian Solar is currently generating about -0.03 per unit of risk. If you would invest  402.00  in Arteris on September 26, 2024 and sell it today you would earn a total of  576.00  from holding Arteris or generate 143.28% return on investment over 90 days.

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

Arteris  vs.  Canadian Solar

Arteris

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arteris are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Arteris reported 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 weak performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Arteris and Canadian Solar

The main advantage of trading using opposite Arteris and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arteris 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 Arteris 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.