Correlation Between Canadian Solar and Micron Technology

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

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

Diversification Opportunities for Canadian Solar and Micron Technology

0.19

Correlation Coefficient

Canadian Solar  Micron Technology

Average diversification

The 3 months correlation between Canadian and Micron is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Canadian Solar i.e., Canadian Solar and Micron Technology go up and down completely randomly.

Pair Corralation between Canadian Solar and Micron Technology

Given the investment horizon of 90 days Canadian Solar is expected to under-perform the Micron Technology. In addition to that, Canadian Solar is 2.57 times more volatile than Micron Technology. It trades about -0.08 of its total potential returns per unit of risk. Micron Technology is currently generating about 0.15 per unit of volatility. If you would invest  10,254  in Micron Technology on August 9, 2024 and sell it today you would earn a total of  929.00  from holding Micron Technology or generate 9.06% return on investment over 90 days.

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

Canadian Solar  vs.  Micron Technology

Canadian Solar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Solar are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, Canadian Solar may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Micron Technology

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Solar and Micron Technology

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

The idea behind Canadian Solar and Micron Technology 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.