Correlation Between Danaher and First Solar
Can any of the company-specific risk be diversified away by investing in both Danaher 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 Danaher and First Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danaher and First Solar, you can compare the effects of market volatilities on Danaher 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 Danaher with a short position of First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danaher and First Solar.
Diversification Opportunities for Danaher and First Solar
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Danaher and First is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and Danaher 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 Danaher 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 Danaher i.e., Danaher and First Solar go up and down completely randomly.
Pair Corralation between Danaher and First Solar
Assuming the 90 days trading horizon Danaher is expected to generate 0.5 times more return on investment than First Solar. However, Danaher is 1.99 times less risky than First Solar. It trades about 0.33 of its potential returns per unit of risk. First Solar is currently generating about -0.14 per unit of risk. If you would invest 455,100 in Danaher on October 30, 2024 and sell it today you would earn a total of 44,700 from holding Danaher or generate 9.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Danaher vs. First Solar
Performance |
| Timeline |
| Danaher |
| First Solar |
Danaher and First Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Danaher and First Solar
The main advantage of trading using opposite Danaher and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danaher 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.| Danaher vs. Thermo Fisher Scientific | Danaher vs. Fideicomiso Irrevocable No | Danaher vs. CEMEX SAB de | Danaher vs. Royal Caribbean Group |
| First Solar vs. Grupo Sports World | First Solar vs. Cognizant Technology Solutions | First Solar vs. First Majestic Silver | First Solar vs. The Bank of |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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