Correlation Between Brookfield Business and Canadian Solar

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

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

Diversification Opportunities for Brookfield Business and Canadian Solar

0.87

Correlation Coefficient

Brookfield Business  Canadian Solar

Very poor diversification

The 3 months correlation between Brookfield and Canadian is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Partners and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and Brookfield Business 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 Brookfield Business Partners 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 Brookfield Business i.e., Brookfield Business and Canadian Solar go up and down completely randomly.

Pair Corralation between Brookfield Business and Canadian Solar

Considering the 90-day investment horizon Brookfield Business Partners is expected to under-perform the Canadian Solar. But the stock apears to be less risky and, when comparing its historical volatility, Brookfield Business Partners is 2.7 times less risky than Canadian Solar. The stock trades about -0.22 of its potential returns per unit of risk. The Canadian Solar is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,737  in Canadian Solar on February 7, 2024 and sell it today you would lose (58.00) from holding Canadian Solar or give up 3.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Brookfield Business Partners  vs.  Canadian Solar

Brookfield Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Business Partners 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 fundamental drivers remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 unfluctuating performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Brookfield Business and Canadian Solar

The main advantage of trading using opposite Brookfield Business and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Business 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 Brookfield Business Partners 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.