Correlation Between First Solar and First BanCorp

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

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

Diversification Opportunities for First Solar and First BanCorp

0.28

Correlation Coefficient

First Solar  First BanCorp

Modest diversification

The 3 months correlation between First and First is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and First BanCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First BanCorp 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 First BanCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First BanCorp has no effect on the direction of First Solar i.e., First Solar and First BanCorp go up and down completely randomly.

Pair Corralation between First Solar and First BanCorp

Assuming the 90 days horizon First Solar is expected to under-perform the First BanCorp. In addition to that, First Solar is 1.65 times more volatile than First BanCorp. It trades about -0.18 of its total potential returns per unit of risk. First BanCorp is currently generating about -0.02 per unit of volatility. If you would invest  1,734  in First BanCorp on December 21, 2024 and sell it today you would lose (54.00) from holding First BanCorp or give up 3.11% of portfolio value over 90 days.

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

First Solar  vs.  First BanCorp

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.

First BanCorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First BanCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First BanCorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Solar and First BanCorp

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

The idea behind First Solar and First BanCorp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.