Correlation Between Fibra Shop and First Solar

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Can any of the company-specific risk be diversified away by investing in both Fibra Shop 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 Fibra Shop and First Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fibra Shop and First Solar, you can compare the effects of market volatilities on Fibra Shop 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 Fibra Shop with a short position of First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fibra Shop and First Solar.

Diversification Opportunities for Fibra Shop and First Solar

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Fibra and First is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fibra Shop and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and Fibra Shop 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 Fibra Shop 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 Fibra Shop i.e., Fibra Shop and First Solar go up and down completely randomly.

Pair Corralation between Fibra Shop and First Solar

Assuming the 90 days trading horizon Fibra Shop is expected to generate 0.7 times more return on investment than First Solar. However, Fibra Shop is 1.42 times less risky than First Solar. It trades about -0.02 of its potential returns per unit of risk. First Solar is currently generating about -0.23 per unit of risk. If you would invest  870.00  in Fibra Shop on November 8, 2024 and sell it today you would lose (9.00) from holding Fibra Shop or give up 1.03% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Fibra Shop  vs.  First Solar

 Performance 
       Timeline  
Fibra Shop 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Fibra Shop are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fibra Shop may actually be approaching a critical reversion point that can send shares even higher in March 2025.
First Solar 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days First Solar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fibra Shop and First Solar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fibra Shop and First Solar

The main advantage of trading using opposite Fibra Shop and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fibra Shop 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.
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The idea behind Fibra Shop 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.
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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