Correlation Between Canadian Solar and Sunrun

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

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

Diversification Opportunities for Canadian Solar and Sunrun

0.63

Correlation Coefficient

Canadian Solar  Sunrun

Poor diversification

The 3 months correlation between Canadian and Sunrun is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and Sunrun Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunrun Inc 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 Sunrun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunrun Inc has no effect on the direction of Canadian Solar i.e., Canadian Solar and Sunrun go up and down completely randomly.

Pair Corralation between Canadian Solar and Sunrun

Assuming the 90 days horizon Canadian Solar is expected to under-perform the Sunrun. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Solar is 1.39 times less risky than Sunrun. The stock trades about -0.03 of its potential returns per unit of risk. The Sunrun Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,393  in Sunrun Inc on September 12, 2024 and sell it today you would lose (1,402) from holding Sunrun Inc or give up 58.59% 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.  Sunrun Inc

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. Despite nearly stable basic indicators, Canadian Solar is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sunrun Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunrun Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Canadian Solar and Sunrun

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

The idea behind Canadian Solar and Sunrun Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.