Correlation Between Canadian Solar and SolarEdge Technologies

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

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

Diversification Opportunities for Canadian Solar and SolarEdge Technologies

0.06

Correlation Coefficient

Canadian Solar  SolarEdge Technologies

Significant diversification

The 3 months correlation between Canadian and SolarEdge is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and SolarEdge Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarEdge Technologies 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 SolarEdge Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarEdge Technologies has no effect on the direction of Canadian Solar i.e., Canadian Solar and SolarEdge Technologies go up and down completely randomly.

Pair Corralation between Canadian Solar and SolarEdge Technologies

Given the investment horizon of 90 days Canadian Solar is expected to under-perform the SolarEdge Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Solar is 1.54 times less risky than SolarEdge Technologies. The stock trades about -0.07 of its potential returns per unit of risk. The SolarEdge Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,357  in SolarEdge Technologies on December 30, 2024 and sell it today you would earn a total of  228.00  from holding SolarEdge Technologies or generate 16.8% return on investment over 90 days.

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

Canadian Solar  vs.  SolarEdge Technologies

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 unfluctuating performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

SolarEdge Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SolarEdge Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, SolarEdge Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Solar and SolarEdge Technologies

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

The idea behind Canadian Solar and SolarEdge Technologies 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.