Correlation Between First Solar and Solar Integrated

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

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

Diversification Opportunities for First Solar and Solar Integrated

0.25

Correlation Coefficient

First Solar  Solar Integrated

Modest diversification

The 3 months correlation between First and Solar is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Solar Integrated Roofing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Integrated Roofing 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 Solar Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Integrated Roofing has no effect on the direction of First Solar i.e., First Solar and Solar Integrated go up and down completely randomly.

Pair Corralation between First Solar and Solar Integrated

Given the investment horizon of 90 days First Solar is expected to under-perform the Solar Integrated. But the stock apears to be less risky and, when comparing its historical volatility, First Solar is 57.73 times less risky than Solar Integrated. The stock trades about -0.18 of its potential returns per unit of risk. The Solar Integrated Roofing is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Solar Integrated Roofing on December 26, 2024 and sell it today you would lose (0.01) from holding Solar Integrated Roofing or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

First Solar  vs.  Solar Integrated Roofing

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. Even with inconsistent performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Solar Integrated Roofing

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Integrated Roofing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Solar Integrated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Solar and Solar Integrated

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

The idea behind First Solar and Solar Integrated Roofing 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.