Correlation Between SolarEdge Technologies and Canadian Solar

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

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

Diversification Opportunities for SolarEdge Technologies and Canadian Solar

0.86

Correlation Coefficient

SolarEdge Technologies  Canadian Solar

Very poor diversification

The 3 months correlation between SolarEdge and Canadian is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SolarEdge Technologies and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and SolarEdge Technologies 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 SolarEdge Technologies are associated (or correlated) with Canadian Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Solar has no effect on the direction of SolarEdge Technologies i.e., SolarEdge Technologies and Canadian Solar go up and down completely randomly.

Pair Corralation between SolarEdge Technologies and Canadian Solar

Assuming the 90 days horizon SolarEdge Technologies is expected to generate 1.28 times more return on investment than Canadian Solar. However, SolarEdge Technologies is 1.28 times more volatile than Canadian Solar. It trades about 0.16 of its potential returns per unit of risk. Canadian Solar is currently generating about 0.15 per unit of risk. If you would invest  1,198  in SolarEdge Technologies on April 21, 2025 and sell it today you would earn a total of  1,052  from holding SolarEdge Technologies or generate 87.81% return on investment over 90 days.

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

SolarEdge Technologies  vs.  Canadian Solar

SolarEdge Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SolarEdge Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SolarEdge Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Canadian Solar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Solar are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Canadian Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SolarEdge Technologies and Canadian Solar

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

The idea behind SolarEdge Technologies and Canadian Solar 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.