Correlation Between Globalfoundries and First Solar
Can any of the company-specific risk be diversified away by investing in both Globalfoundries 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 Globalfoundries and First Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Globalfoundries and First Solar, you can compare the effects of market volatilities on Globalfoundries 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 Globalfoundries with a short position of First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globalfoundries and First Solar.
Diversification Opportunities for Globalfoundries and First Solar
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Globalfoundries and First is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and Globalfoundries 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 Globalfoundries 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 Globalfoundries i.e., Globalfoundries and First Solar go up and down completely randomly.
Pair Corralation between Globalfoundries and First Solar
Considering the 90-day investment horizon Globalfoundries is expected to generate 0.87 times more return on investment than First Solar. However, Globalfoundries is 1.15 times less risky than First Solar. It trades about 0.07 of its potential returns per unit of risk. First Solar is currently generating about 0.06 per unit of risk. If you would invest 4,275 in Globalfoundries on September 15, 2024 and sell it today you would earn a total of 113.00 from holding Globalfoundries or generate 2.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Globalfoundries vs. First Solar
Performance |
| Timeline |
| Globalfoundries |
| First Solar |
Globalfoundries and First Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Globalfoundries and First Solar
The main advantage of trading using opposite Globalfoundries and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globalfoundries 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.| Globalfoundries vs. NXP Semiconductors NV | Globalfoundries vs. Analog Devices | Globalfoundries vs. ON Semiconductor | Globalfoundries vs. Lattice Semiconductor |
| 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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