Correlation Between AUREA SA and Canadian Solar

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

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

Diversification Opportunities for AUREA SA and Canadian Solar

0.85

Correlation Coefficient

AUREA SA  Canadian Solar

Very poor diversification

The 3 months correlation between AUREA and Canadian is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AUREA SA INH and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and AUREA SA 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 AUREA SA INH 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 AUREA SA i.e., AUREA SA and Canadian Solar go up and down completely randomly.

Pair Corralation between AUREA SA and Canadian Solar

Assuming the 90 days horizon AUREA SA is expected to generate 3.27 times less return on investment than Canadian Solar. But when comparing it to its historical volatility, AUREA SA INH is 3.33 times less risky than Canadian Solar. It trades about 0.12 of its potential returns per unit of risk. Canadian Solar is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  780.00  in Canadian Solar on April 24, 2025 and sell it today you would earn a total of  335.00  from holding Canadian Solar or generate 42.95% return on investment over 90 days.

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

AUREA SA INH  vs.  Canadian Solar

AUREA SA INH

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AUREA SA INH are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, AUREA SA reported solid returns over the last few months and may actually be approaching a breakup point.

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. 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 AUREA SA and Canadian Solar

The main advantage of trading using opposite AUREA SA and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUREA SA 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 AUREA SA INH 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.