Correlation Between First Solar and Valens
Can any of the company-specific risk be diversified away by investing in both First Solar and Valens 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 Valens into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Solar and Valens, you can compare the effects of market volatilities on First Solar and Valens 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 Valens. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Solar and Valens.
Diversification Opportunities for First Solar and Valens
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Valens is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of First Solar i.e., First Solar and Valens go up and down completely randomly.
Pair Corralation between First Solar and Valens
Given the investment horizon of 90 days First Solar is expected to generate 1.0 times more return on investment than Valens. However, First Solar is 1.0 times more volatile than Valens. It trades about 0.03 of its potential returns per unit of risk. Valens is currently generating about -0.05 per unit of risk. If you would invest 16,747 in First Solar on August 27, 2024 and sell it today you would earn a total of 2,535 from holding First Solar or generate 15.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Solar vs. Valens
Performance |
| Timeline |
| First Solar |
| Valens |
First Solar and Valens Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Solar and Valens
The main advantage of trading using opposite First Solar and Valens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Solar position performs unexpectedly, Valens 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 Valens will offset losses from the drop in Valens' long position.| 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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