Correlation Between First Solar and Sunrun

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

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

Diversification Opportunities for First Solar and Sunrun

0.82

Correlation Coefficient

First Solar  Sunrun

Very poor diversification

The 3 months correlation between First and Sunrun is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Sunrun Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunrun Inc and First 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 First Solar are associated (or correlated) with Sunrun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunrun Inc has no effect on the direction of First Solar i.e., First Solar and Sunrun go up and down completely randomly.

Pair Corralation between First Solar and Sunrun

Assuming the 90 days horizon First Solar is expected to generate 0.79 times more return on investment than Sunrun. However, First Solar is 1.27 times less risky than Sunrun. It trades about -0.2 of its potential returns per unit of risk. Sunrun Inc is currently generating about -0.17 per unit of risk. If you would invest  19,784  in First Solar on December 2, 2024 and sell it today you would lose (6,574) from holding First Solar or give up 33.23% of portfolio value over 90 days.

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

First Solar  vs.  Sunrun Inc

First Solar

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Solar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sunrun Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sunrun Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with First Solar and Sunrun

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

The idea behind First Solar and Sunrun Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.