Correlation Between Canadian Solar and Power Integrations

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

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

Diversification Opportunities for Canadian Solar and Power Integrations

0.59

Correlation Coefficient

Canadian Solar  Power Integrations

Very weak diversification

The 3 months correlation between Canadian and Power is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and Power Integrations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Integrations 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 Power Integrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Integrations has no effect on the direction of Canadian Solar i.e., Canadian Solar and Power Integrations go up and down completely randomly.

Pair Corralation between Canadian Solar and Power Integrations

Given the investment horizon of 90 days Canadian Solar is expected to generate 1.38 times more return on investment than Power Integrations. However, Canadian Solar is 1.38 times more volatile than Power Integrations. It trades about -0.05 of its potential returns per unit of risk. Power Integrations is currently generating about -0.11 per unit of risk. If you would invest  1,123  in Canadian Solar on December 29, 2024 and sell it today you would lose (164.00) from holding Canadian Solar or give up 14.6% of portfolio value over 90 days.

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

Canadian Solar  vs.  Power Integrations

Canadian Solar

Risk-Adjusted Performance

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.

Power Integrations

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Integrations 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 fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Canadian Solar and Power Integrations

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

The idea behind Canadian Solar and Power Integrations 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.