Correlation Between Alpha and First Solar
Can any of the company-specific risk be diversified away by investing in both Alpha and First Solar 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 Alpha and First Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alpha and Omega and First Solar, you can compare the effects of market volatilities on Alpha and First Solar 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 Alpha with a short position of First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha and First Solar.
Diversification Opportunities for Alpha and First Solar
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alpha and First is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and Alpha 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 Alpha and Omega are associated (or correlated) with First Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of Alpha i.e., Alpha and First Solar go up and down completely randomly.
Pair Corralation between Alpha and First Solar
Given the investment horizon of 90 days Alpha and Omega is expected to generate 2.6 times more return on investment than First Solar. However, Alpha is 2.6 times more volatile than First Solar. It trades about 0.04 of its potential returns per unit of risk. First Solar is currently generating about -0.03 per unit of risk. If you would invest 3,663 in Alpha and Omega on August 30, 2024 and sell it today you would lose (58.00) from holding Alpha and Omega or give up 1.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alpha and Omega vs. First Solar
Performance |
| Timeline |
| Alpha and Omega |
| First Solar |
Alpha and First Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alpha and First Solar
The main advantage of trading using opposite Alpha and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha position performs unexpectedly, First Solar 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 Solar will offset losses from the drop in First Solar's long position.The idea behind Alpha and Omega and First Solar 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.| First Solar vs. Enphase Energy | First Solar vs. Sunrun Inc | First Solar vs. Canadian Solar | First Solar vs. SolarEdge Technologies |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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