Correlation Between First Solar and Silicon Laboratories

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

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

Diversification Opportunities for First Solar and Silicon Laboratories

-0.73

Correlation Coefficient

First Solar  Silicon Laboratories

Pay attention - limited upside

The 3 months correlation between First and Silicon is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories 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 Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of First Solar i.e., First Solar and Silicon Laboratories go up and down completely randomly.

Pair Corralation between First Solar and Silicon Laboratories

Given the investment horizon of 90 days First Solar is expected to under-perform the Silicon Laboratories. In addition to that, First Solar is 1.06 times more volatile than Silicon Laboratories. It trades about -0.02 of its total potential returns per unit of risk. Silicon Laboratories is currently generating about 0.16 per unit of volatility. If you would invest  13,212  in Silicon Laboratories on November 28, 2024 and sell it today you would earn a total of  1,217  from holding Silicon Laboratories or generate 9.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

First Solar  vs.  Silicon Laboratories

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 March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Silicon Laboratories

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Laboratories are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Silicon Laboratories sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Solar and Silicon Laboratories

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

The idea behind First Solar and Silicon Laboratories 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 Commodity Directory module to find actively traded commodities issued by global exchanges.