Correlation Between First Solar and Newhydrogen

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

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

Diversification Opportunities for First Solar and Newhydrogen

0.68

Correlation Coefficient

First Solar  Newhydrogen

Poor diversification

The 3 months correlation between First and Newhydrogen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Newhydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newhydrogen 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 Newhydrogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newhydrogen has no effect on the direction of First Solar i.e., First Solar and Newhydrogen go up and down completely randomly.

Pair Corralation between First Solar and Newhydrogen

Given the investment horizon of 90 days First Solar is expected to generate 1.87 times less return on investment than Newhydrogen. But when comparing it to its historical volatility, First Solar is 5.5 times less risky than Newhydrogen. It trades about 0.11 of its potential returns per unit of risk. Newhydrogen is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Newhydrogen on September 16, 2024 and sell it today you would lose (0.02) from holding Newhydrogen or give up 5.71% of portfolio value over 90 days.

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

First Solar  vs.  Newhydrogen

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 latest uncertain performance, the Stock's essential indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Newhydrogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newhydrogen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with First Solar and Newhydrogen

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

The idea behind First Solar and Newhydrogen 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.