Correlation Between Canadian Solar and Emeren

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

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

Diversification Opportunities for Canadian Solar and Emeren

0.73

Correlation Coefficient

Canadian Solar  Emeren

Poor diversification

The 3 months correlation between Canadian and Emeren is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and Emeren Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emeren Group 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 Emeren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emeren Group has no effect on the direction of Canadian Solar i.e., Canadian Solar and Emeren go up and down completely randomly.

Pair Corralation between Canadian Solar and Emeren

Given the investment horizon of 90 days Canadian Solar is expected to generate 0.61 times more return on investment than Emeren. However, Canadian Solar is 1.65 times less risky than Emeren. It trades about -0.05 of its potential returns per unit of risk. Emeren Group is currently generating about -0.04 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	Significant
Accuracy	100.0%
Values	Daily Returns

Canadian Solar  vs.  Emeren Group

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.

Emeren Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Emeren Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Canadian Solar and Emeren

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

The idea behind Canadian Solar and Emeren 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.