Correlation Between First Solar and Shoals Technologies
Can any of the company-specific risk be diversified away by investing in both First Solar and Shoals Technologies 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 Shoals Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Solar and Shoals Technologies Group, you can compare the effects of market volatilities on First Solar and Shoals Technologies 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 Shoals Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Solar and Shoals Technologies.
Diversification Opportunities for First Solar and Shoals Technologies
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Shoals is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Shoals Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoals Technologies 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 Shoals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoals Technologies has no effect on the direction of First Solar i.e., First Solar and Shoals Technologies go up and down completely randomly.
Pair Corralation between First Solar and Shoals Technologies
Given the investment horizon of 90 days First Solar is expected to under-perform the Shoals Technologies. But the stock apears to be less risky and, when comparing its historical volatility, First Solar is 1.61 times less risky than Shoals Technologies. The stock trades about -0.06 of its potential returns per unit of risk. The Shoals Technologies Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 536.00 in Shoals Technologies Group on August 28, 2024 and sell it today you would lose (29.00) from holding Shoals Technologies Group or give up 5.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Solar vs. Shoals Technologies Group
Performance |
| Timeline |
| First Solar |
| Shoals Technologies |
First Solar and Shoals Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Solar and Shoals Technologies
The main advantage of trading using opposite First Solar and Shoals Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Solar position performs unexpectedly, Shoals Technologies 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 Shoals Technologies will offset losses from the drop in Shoals Technologies' long position.| First Solar vs. Enphase Energy | First Solar vs. Sunrun Inc | First Solar vs. Canadian Solar | First Solar vs. SolarEdge Technologies |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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