Correlation Between GCL Poly and Canadian Solar

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

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

Diversification Opportunities for GCL Poly and Canadian Solar

0.22

Correlation Coefficient

GCL Poly  Canadian Solar

Modest diversification

The 3 months correlation between GCL and Canadian is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding GCL Poly Energy Holdings and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and GCL Poly 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 GCL Poly Energy Holdings 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 GCL Poly i.e., GCL Poly and Canadian Solar go up and down completely randomly.

Pair Corralation between GCL Poly and Canadian Solar

Assuming the 90 days horizon GCL Poly Energy Holdings is expected to under-perform the Canadian Solar. In addition to that, GCL Poly is 4.37 times more volatile than Canadian Solar. It trades about -0.04 of its total potential returns per unit of risk. Canadian Solar is currently generating about 0.05 per unit of volatility. If you would invest  1,076  in Canadian Solar on October 20, 2024 and sell it today you would earn a total of  29.00  from holding Canadian Solar or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

GCL Poly Energy Holdings  vs.  Canadian Solar

GCL Poly Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GCL Poly Energy Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, GCL Poly 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 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.

Pair Trading with GCL Poly and Canadian Solar

The main advantage of trading using opposite GCL Poly and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GCL Poly 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 GCL Poly Energy Holdings 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.