Correlation Between China Solar and Applied Digital

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

By analyzing existing cross correlation between China Solar Cln and Applied Digital, you can compare the effects of market volatilities on China Solar and Applied Digital 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 China Solar with a short position of Applied Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Solar and Applied Digital.

Diversification Opportunities for China Solar and Applied Digital

0.29

Correlation Coefficient

China Solar  Applied Digital

Modest diversification

The 3 months correlation between China and Applied is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Solar Cln and Applied Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Digital and China 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 China Solar Cln are associated (or correlated) with Applied Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Digital has no effect on the direction of China Solar i.e., China Solar and Applied Digital go up and down completely randomly.

Pair Corralation between China Solar and Applied Digital

Given the investment horizon of 90 days China Solar Cln is expected to generate 2.53 times more return on investment than Applied Digital. However, China Solar is 2.53 times more volatile than Applied Digital. It trades about 0.13 of its potential returns per unit of risk. Applied Digital is currently generating about 0.16 per unit of risk. If you would invest  1.00  in China Solar Cln on May 19, 2025 and sell it today you would earn a total of  1.00  from holding China Solar Cln or generate 100.0% return on investment over 90 days.

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

China Solar Cln  vs.  Applied Digital

China Solar Cln

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in China Solar Cln are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, China Solar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Applied Digital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Digital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Applied Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Solar and Applied Digital

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

The idea behind China Solar Cln and Applied Digital 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.