Correlation Between Microchip Technology and Canadian Solar
Can any of the company-specific risk be diversified away by investing in both Microchip Technology 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 Microchip Technology and Canadian Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microchip Technology Incorporated and Canadian Solar, you can compare the effects of market volatilities on Microchip Technology 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 Microchip Technology with a short position of Canadian Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and Canadian Solar.
Diversification Opportunities for Microchip Technology and Canadian Solar
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Microchip and Canadian is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and Microchip Technology 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 Microchip Technology Incorporated 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 Microchip Technology i.e., Microchip Technology and Canadian Solar go up and down completely randomly.
Pair Corralation between Microchip Technology and Canadian Solar
Assuming the 90 days horizon Microchip Technology is expected to generate 2.66 times less return on investment than Canadian Solar. But when comparing it to its historical volatility, Microchip Technology Incorporated is 3.03 times less risky than Canadian Solar. It trades about 0.27 of its potential returns per unit of risk. Canadian Solar is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,013 in Canadian Solar on April 22, 2025 and sell it today you would earn a total of 212.00 from holding Canadian Solar or generate 20.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Microchip Technology Incorpora vs. Canadian Solar
Performance |
| Timeline |
| Microchip Technology |
| Canadian Solar |
Microchip Technology and Canadian Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microchip Technology and Canadian Solar
The main advantage of trading using opposite Microchip Technology and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology 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.| Microchip Technology vs. Lincoln Electric Holdings | Microchip Technology vs. Target Hospitality Corp | Microchip Technology vs. Chatham Lodging Trust | Microchip Technology vs. Timken Company |
| Canadian Solar vs. JinkoSolar Holding | Canadian Solar vs. First Solar | Canadian Solar vs. Complete Solaria, | Canadian Solar vs. SolarEdge Technologies |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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