Correlation Between Canadian Solar and Asia Pacific

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

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

Diversification Opportunities for Canadian Solar and Asia Pacific

0.72

Correlation Coefficient

Canadian Solar  Asia Pacific

Poor diversification

The 3 months correlation between Canadian and Asia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and Asia Pacific Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Investment and Canadian Solar 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 Canadian Solar are associated (or correlated) with Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Investment has no effect on the direction of Canadian Solar i.e., Canadian Solar and Asia Pacific go up and down completely randomly.

Pair Corralation between Canadian Solar and Asia Pacific

Given the investment horizon of 90 days Canadian Solar is expected to generate 1.34 times less return on investment than Asia Pacific. But when comparing it to its historical volatility, Canadian Solar is 1.12 times less risky than Asia Pacific. It trades about 0.14 of its potential returns per unit of risk. Asia Pacific Investment is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  550,000  in Asia Pacific Investment on April 30, 2025 and sell it today you would earn a total of  260,000  from holding Asia Pacific Investment or generate 47.27% return on investment over 90 days.

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

Canadian Solar  vs.  Asia Pacific Investment

Canadian Solar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Solar are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward indicators, Canadian Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Asia Pacific Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Pacific Investment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Asia Pacific displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Solar and Asia Pacific

The main advantage of trading using opposite Canadian Solar and Asia Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Solar position performs unexpectedly, Asia Pacific 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 Asia Pacific will offset losses from the drop in Asia Pacific's long position.

The idea behind Canadian Solar and Asia Pacific Investment 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.