Correlation Between Firsthand Alternative and Tsmxx

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

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

Diversification Opportunities for Firsthand Alternative and Tsmxx

0.1

Correlation Coefficient

Firsthand Alternative  Tsmxx

Average diversification

The 3 months correlation between Firsthand and Tsmxx is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Firsthand Alternative Energy and Tsmxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsmxx and Firsthand Alternative 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 Firsthand Alternative Energy are associated (or correlated) with Tsmxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsmxx has no effect on the direction of Firsthand Alternative i.e., Firsthand Alternative and Tsmxx go up and down completely randomly.

Pair Corralation between Firsthand Alternative and Tsmxx

Assuming the 90 days horizon Firsthand Alternative Energy is expected to under-perform the Tsmxx. But the mutual fund apears to be less risky and, when comparing its historical volatility, Firsthand Alternative Energy is 46.72 times less risky than Tsmxx. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Tsmxx is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Tsmxx on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Tsmxx or generate 0.0% return on investment over 90 days.

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

Firsthand Alternative Energy  vs.  Tsmxx

Firsthand Alternative

Risk-Adjusted Performance

Very Weak

Over the last 90 days Firsthand Alternative Energy has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Tsmxx

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsmxx are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tsmxx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Firsthand Alternative and Tsmxx

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

The idea behind Firsthand Alternative Energy and Tsmxx 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 Transaction History module to view history of all your transactions and understand their impact on performance.