Correlation Between Canadian Solar and Short Duration

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

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

Diversification Opportunities for Canadian Solar and Short Duration

0.82

Correlation Coefficient

Canadian Solar  Short Duration

Very poor diversification

The 3 months correlation between Canadian and Short is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and Short Duration Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Municipal 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Municipal has no effect on the direction of Canadian Solar i.e., Canadian Solar and Short Duration go up and down completely randomly.

Pair Corralation between Canadian Solar and Short Duration

Given the investment horizon of 90 days Canadian Solar is expected to generate 49.37 times more return on investment than Short Duration. However, Canadian Solar is 49.37 times more volatile than Short Duration Municipal. It trades about 0.11 of its potential returns per unit of risk. Short Duration Municipal is currently generating about 0.28 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	Strong
Accuracy	100.0%
Values	Daily Returns

Canadian Solar  vs.  Short Duration Municipal

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.

Short Duration Municipal

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Short Duration Municipal are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Canadian Solar and Short Duration

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

The idea behind Canadian Solar and Short Duration Municipal 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.