Correlation Between Canadian Solar and Servotronics

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

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

Diversification Opportunities for Canadian Solar and Servotronics

0.82

Correlation Coefficient

Canadian Solar  Servotronics

Very poor diversification

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

Pair Corralation between Canadian Solar and Servotronics

Given the investment horizon of 90 days Canadian Solar is expected to generate 35.88 times less return on investment than Servotronics. But when comparing it to its historical volatility, Canadian Solar is 12.04 times less risky than Servotronics. It trades about 0.06 of its potential returns per unit of risk. Servotronics is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,042  in Servotronics on May 12, 2025 and sell it today you would earn a total of  3,652  from holding Servotronics or generate 350.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	58.73%
Values	Daily Returns

Canadian Solar  vs.  Servotronics

Canadian Solar

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Solar are ranked lower than 4 (%) 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.

Servotronics

Risk-Adjusted Performance

Good

Over the last 90 days Servotronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady basic indicators, Servotronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Solar and Servotronics

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

The idea behind Canadian Solar and Servotronics 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.