Correlation Between MACOM Technology and Canadian Solar

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

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

Diversification Opportunities for MACOM Technology and Canadian Solar

-0.64

Correlation Coefficient

MACOM Technology  Canadian Solar

Excellent diversification

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

Pair Corralation between MACOM Technology and Canadian Solar

Given the investment horizon of 90 days MACOM Technology Solutions is expected to under-perform the Canadian Solar. But the stock apears to be less risky and, when comparing its historical volatility, MACOM Technology Solutions is 1.72 times less risky than Canadian Solar. The stock trades about -0.03 of its potential returns per unit of risk. The Canadian Solar is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,253  in Canadian Solar on October 10, 2024 and sell it today you would earn a total of  76.00  from holding Canadian Solar or generate 6.07% return on investment over 90 days.

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

MACOM Technology Solutions  vs.  Canadian Solar

MACOM Technology Sol

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Canadian Solar

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Solar are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 MACOM Technology and Canadian Solar

The main advantage of trading using opposite MACOM Technology and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology 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 MACOM Technology Solutions 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..