Correlation Between Workday and Canadian Solar

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

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

Diversification Opportunities for Workday and Canadian Solar

-0.65

Correlation Coefficient

Workday  Canadian Solar

Excellent diversification

The 3 months correlation between Workday and Canadian is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Workday and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and Workday 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 Workday 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 Workday i.e., Workday and Canadian Solar go up and down completely randomly.

Pair Corralation between Workday and Canadian Solar

Given the investment horizon of 90 days Workday is expected to generate 0.35 times more return on investment than Canadian Solar. However, Workday is 2.88 times less risky than Canadian Solar. It trades about 0.07 of its potential returns per unit of risk. Canadian Solar is currently generating about 0.0 per unit of risk. If you would invest  25,119  in Workday on September 12, 2024 and sell it today you would earn a total of  1,969  from holding Workday or generate 7.84% return on investment over 90 days.

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

Workday  vs.  Canadian Solar

Workday

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Workday are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Workday may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. 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 Workday and Canadian Solar

The main advantage of trading using opposite Workday and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workday 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 Workday 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.