Correlation Between Canadian Solar and Shoals Technologies

Can any of the company-specific risk be diversified away by investing in both Canadian Solar and Shoals 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 Shoals 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 Shoals Technologies Group, you can compare the effects of market volatilities on Canadian Solar and Shoals 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 Shoals Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Solar and Shoals Technologies.

Diversification Opportunities for Canadian Solar and Shoals Technologies

0.55

Correlation Coefficient

Canadian Solar  Shoals Technologies

Very weak diversification

The 3 months correlation between Canadian and Shoals is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and Shoals Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoals 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 Shoals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoals Technologies has no effect on the direction of Canadian Solar i.e., Canadian Solar and Shoals Technologies go up and down completely randomly.

Pair Corralation between Canadian Solar and Shoals Technologies

Given the investment horizon of 90 days Canadian Solar is expected to generate 0.89 times more return on investment than Shoals Technologies. However, Canadian Solar is 1.12 times less risky than Shoals Technologies. It trades about 0.1 of its potential returns per unit of risk. Shoals Technologies Group is currently generating about -0.14 per unit of risk. If you would invest  1,177  in Canadian Solar on September 15, 2024 and sell it today you would earn a total of  92.00  from holding Canadian Solar or generate 7.82% return on investment over 90 days.

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

Canadian Solar  vs.  Shoals Technologies Group

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 relatively invariable forward indicators, Canadian Solar is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Shoals Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shoals Technologies Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Canadian Solar and Shoals Technologies

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

The idea behind Canadian Solar and Shoals Technologies Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.