Correlation Between Workday and Canadian Solar

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

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

Diversification Opportunities for Workday and Canadian Solar

-0.66

Correlation Coefficient

Workday  Canadian Solar

Excellent diversification

The 3 months correlation between Workday and Canadian is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Workday and Canadian Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Solar and Workday 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 Workday 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 Workday i.e., Workday and Canadian Solar go up and down completely randomly.

Pair Corralation between Workday and Canadian Solar

Given the investment horizon of 90 days Workday is expected to under-perform the Canadian Solar. But the stock apears to be less risky and, when comparing its historical volatility, Workday is 3.4 times less risky than Canadian Solar. The stock trades about -0.02 of its potential returns per unit of risk. The Canadian Solar is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,246  in Canadian Solar on September 4, 2024 and sell it today you would earn a total of  26.00  from holding Canadian Solar or generate 2.09% return on investment over 90 days.

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

Workday  vs.  Canadian Solar

Workday

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Workday has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Workday is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Canadian Solar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Solar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, Canadian Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Workday and Canadian Solar

The main advantage of trading using opposite Workday and Canadian Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workday 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 Workday 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.