Correlation Between Entegris and First Solar

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

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

Diversification Opportunities for Entegris and First Solar

0.44

Correlation Coefficient

Entegris  First Solar

Very weak diversification

The 3 months correlation between Entegris and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Entegris and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and Entegris 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 Entegris 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 Entegris i.e., Entegris and First Solar go up and down completely randomly.

Pair Corralation between Entegris and First Solar

Given the investment horizon of 90 days Entegris is expected to generate 0.65 times more return on investment than First Solar. However, Entegris is 1.53 times less risky than First Solar. It trades about 0.2 of its potential returns per unit of risk. First Solar is currently generating about -0.02 per unit of risk. If you would invest  10,228  in Entegris on October 24, 2024 and sell it today you would earn a total of  653.00  from holding Entegris or generate 6.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Entegris  vs.  First Solar

Entegris

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Entegris are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Entegris is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

First Solar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Solar has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, First Solar is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Entegris and First Solar

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

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.