Correlation Between Canadian Solar and First Solar

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

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

Diversification Opportunities for Canadian Solar and First Solar

0.63

Correlation Coefficient

Canadian Solar  First Solar

Poor diversification

The 3 months correlation between Canadian and First is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Solar and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar 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 First Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of Canadian Solar i.e., Canadian Solar and First Solar go up and down completely randomly.

Pair Corralation between Canadian Solar and First Solar

Assuming the 90 days horizon Canadian Solar is expected to generate 1.13 times more return on investment than First Solar. However, Canadian Solar is 1.13 times more volatile than First Solar. It trades about 0.13 of its potential returns per unit of risk. First Solar is currently generating about 0.09 per unit of risk. If you would invest  732.00  in Canadian Solar on April 23, 2025 and sell it today you would earn a total of  334.00  from holding Canadian Solar or generate 45.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Canadian Solar  vs.  First Solar

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.

First Solar

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Solar are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, First Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Solar and First Solar

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

The idea behind Canadian Solar and First 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.