Correlation Between Canadian Solar and PHLX Oil

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

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

Diversification Opportunities for Canadian Solar and PHLX Oil

0.69

Correlation Coefficient

Canadian Solar  PHLX Oil

Poor diversification

The 3 months correlation between Canadian and PHLX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and PHLX Oil Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHLX Oil Service 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 PHLX Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHLX Oil Service has no effect on the direction of Canadian Solar i.e., Canadian Solar and PHLX Oil go up and down completely randomly.

Pair Corralation between Canadian Solar and PHLX Oil

Given the investment horizon of 90 days Canadian Solar is expected to generate 1.94 times more return on investment than PHLX Oil. However, Canadian Solar is 1.94 times more volatile than PHLX Oil Service. It trades about 0.11 of its potential returns per unit of risk. PHLX Oil Service is currently generating about 0.08 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Canadian Solar  vs.  PHLX Oil Service

Pair Trading with Canadian Solar and PHLX Oil

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

The idea behind Canadian Solar and PHLX Oil Service 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.