Correlation Between Canadian Solar and Third Avenue

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

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

Diversification Opportunities for Canadian Solar and Third Avenue

0.9

Correlation Coefficient

Canadian Solar  Third Avenue

Almost no diversification

The 3 months correlation between Canadian and Third is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and Third Avenue Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Small 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 Third Avenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Avenue Small has no effect on the direction of Canadian Solar i.e., Canadian Solar and Third Avenue go up and down completely randomly.

Pair Corralation between Canadian Solar and Third Avenue

Given the investment horizon of 90 days Canadian Solar is expected to generate 3.91 times more return on investment than Third Avenue. However, Canadian Solar is 3.91 times more volatile than Third Avenue Small Cap. It trades about 0.15 of its potential returns per unit of risk. Third Avenue Small Cap is currently generating about 0.21 per unit of risk. If you would invest  902.00  in Canadian Solar on April 30, 2025 and sell it today you would earn a total of  334.00  from holding Canadian Solar or generate 37.03% return on investment over 90 days.

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

Canadian Solar  vs.  Third Avenue Small Cap

Canadian Solar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Solar are ranked lower than 12 (%) 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.

Third Avenue Small

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Third Avenue Small Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Third Avenue showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Solar and Third Avenue

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

The idea behind Canadian Solar and Third Avenue Small Cap 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.