Correlation Between Shoals Technologies and Canadian Solar

Can any of the company-specific risk be diversified away by investing in both Shoals 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 Shoals 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 Shoals Technologies Group and Canadian Solar, you can compare the effects of market volatilities on Shoals 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 Shoals Technologies with a short position of Canadian Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoals Technologies and Canadian Solar.

Diversification Opportunities for Shoals Technologies and Canadian Solar

0.17

Correlation Coefficient

Shoals Technologies  Canadian Solar

Average diversification

The 3 months correlation between Shoals and Canadian is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Shoals Technologies Group and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and Shoals 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 Shoals Technologies Group 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 Shoals Technologies i.e., Shoals Technologies and Canadian Solar go up and down completely randomly.

Pair Corralation between Shoals Technologies and Canadian Solar

Given the investment horizon of 90 days Shoals Technologies Group is expected to under-perform the Canadian Solar. In addition to that, Shoals Technologies is 1.3 times more volatile than Canadian Solar. It trades about -0.36 of its total potential returns per unit of risk. Canadian Solar is currently generating about 0.08 per unit of volatility. If you would invest  971.00  in Canadian Solar on December 5, 2024 and sell it today you would earn a total of  48.00  from holding Canadian Solar or generate 4.94% return on investment over 90 days.

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

Shoals Technologies Group  vs.  Canadian Solar

Shoals Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shoals Technologies Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Canadian Solar

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Shoals Technologies and Canadian Solar

The main advantage of trading using opposite Shoals Technologies and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoals 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 Shoals Technologies Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.