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
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Silicon is 0.47. 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 1.18 times more volatile than Silicon Laboratories. It trades about -0.06 of its total potential returns per unit of risk. Silicon Laboratories is currently generating about -0.02 per unit of volatility. If you would invest 12,364 in Silicon Laboratories on August 30, 2024 and sell it today you would lose (1,486) from holding Silicon Laboratories or give up 12.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Solar vs. Silicon Laboratories
Performance |
| Timeline |
| First Solar |
| Silicon Laboratories |
First Solar and Silicon Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
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.| First Solar vs. Enphase Energy | First Solar vs. Sunrun Inc | First Solar vs. Canadian Solar | First Solar vs. SolarEdge Technologies |
| Silicon Laboratories vs. First Solar | Silicon Laboratories vs. Sunrun Inc | Silicon Laboratories vs. Canadian Solar | Silicon Laboratories 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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