Correlation Between ChipMOS Technologies and Canadian Solar

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

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

Diversification Opportunities for ChipMOS Technologies and Canadian Solar

0.64

Correlation Coefficient

ChipMOS Technologies  Canadian Solar

Poor diversification

The 3 months correlation between ChipMOS and Canadian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ChipMOS Technologies and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and ChipMOS Technologies 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 ChipMOS Technologies 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 ChipMOS Technologies i.e., ChipMOS Technologies and Canadian Solar go up and down completely randomly.

Pair Corralation between ChipMOS Technologies and Canadian Solar

Given the investment horizon of 90 days ChipMOS Technologies is expected to generate 0.43 times more return on investment than Canadian Solar. However, ChipMOS Technologies is 2.34 times less risky than Canadian Solar. It trades about 0.01 of its potential returns per unit of risk. Canadian Solar is currently generating about -0.03 per unit of risk. If you would invest  1,945  in ChipMOS Technologies on September 4, 2024 and sell it today you would earn a total of  45.00  from holding ChipMOS Technologies or generate 2.31% return on investment over 90 days.

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

ChipMOS Technologies  vs.  Canadian Solar

ChipMOS Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChipMOS Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Canadian Solar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Solar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, Canadian Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChipMOS Technologies and Canadian Solar

The main advantage of trading using opposite ChipMOS Technologies and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChipMOS Technologies 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 ChipMOS Technologies 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.