Correlation Between Sunrun and Canadian Solar

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

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

Diversification Opportunities for Sunrun and Canadian Solar

0.47

Correlation Coefficient

Sunrun  Canadian Solar

Very weak diversification

The 3 months correlation between Sunrun and Canadian is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sunrun Inc and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and Sunrun 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 Sunrun Inc 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 Sunrun i.e., Sunrun and Canadian Solar go up and down completely randomly.

Pair Corralation between Sunrun and Canadian Solar

Considering the 90-day investment horizon Sunrun Inc is expected to under-perform the Canadian Solar. But the stock apears to be less risky and, when comparing its historical volatility, Sunrun Inc is 1.03 times less risky than Canadian Solar. The stock trades about -0.13 of its potential returns per unit of risk. The Canadian Solar is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,263  in Canadian Solar on August 30, 2024 and sell it today you would earn a total of  13.00  from holding Canadian Solar or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Sunrun Inc  vs.  Canadian Solar

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. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm 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 may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Sunrun and Canadian Solar

The main advantage of trading using opposite Sunrun and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunrun 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 Sunrun Inc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.