Correlation Between Canadian Solar and DATA Communications

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

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

Diversification Opportunities for Canadian Solar and DATA Communications

-0.06

Correlation Coefficient

Canadian Solar  DATA Communications

Good diversification

The 3 months correlation between Canadian and DATA is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and DATA Communications Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATA Communications 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 DATA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATA Communications has no effect on the direction of Canadian Solar i.e., Canadian Solar and DATA Communications go up and down completely randomly.

Pair Corralation between Canadian Solar and DATA Communications

Given the investment horizon of 90 days Canadian Solar is expected to generate 0.89 times more return on investment than DATA Communications. However, Canadian Solar is 1.12 times less risky than DATA Communications. It trades about 0.11 of its potential returns per unit of risk. DATA Communications Management is currently generating about -0.02 per unit of risk. If you would invest  918.00  in Canadian Solar on May 3, 2025 and sell it today you would earn a total of  231.00  from holding Canadian Solar or generate 25.16% return on investment over 90 days.

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

Canadian Solar  vs.  DATA Communications Management

Canadian Solar

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Solar are ranked lower than 9 (%) 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.

DATA Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days DATA Communications Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Canadian Solar and DATA Communications

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

The idea behind Canadian Solar and DATA Communications Management 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.