Correlation Between Microchip Technology and First Solar
Can any of the company-specific risk be diversified away by investing in both Microchip Technology 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 Microchip Technology and First Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microchip Technology and First Solar, you can compare the effects of market volatilities on Microchip Technology 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 Microchip Technology with a short position of First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and First Solar.
Diversification Opportunities for Microchip Technology and First Solar
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microchip and First is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and Microchip Technology 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 Microchip Technology 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 Microchip Technology i.e., Microchip Technology and First Solar go up and down completely randomly.
Pair Corralation between Microchip Technology and First Solar
Given the investment horizon of 90 days Microchip Technology is expected to generate 9.97 times less return on investment than First Solar. But when comparing it to its historical volatility, Microchip Technology is 1.52 times less risky than First Solar. It trades about 0.0 of its potential returns per unit of risk. First Solar is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 15,096 in First Solar on August 30, 2024 and sell it today you would earn a total of 4,161 from holding First Solar or generate 27.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microchip Technology vs. First Solar
Performance |
| Timeline |
| Microchip Technology |
| First Solar |
Microchip Technology and First Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microchip Technology and First Solar
The main advantage of trading using opposite Microchip Technology and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology 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.| Microchip Technology vs. First Solar | Microchip Technology vs. Sunrun Inc | Microchip Technology vs. Canadian Solar | Microchip Technology vs. SolarEdge Technologies |
| 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 Stocks Directory module to find actively traded stocks across global markets.
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