Correlation Between United States and First Solar
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and First Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and First Solar, you can compare the effects of market volatilities on United States 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 United States with a short position of First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and First Solar.
Diversification Opportunities for United States and First Solar
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between United and First is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and United States 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 United States Steel 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 United States i.e., United States and First Solar go up and down completely randomly.
Pair Corralation between United States and First Solar
Given the investment horizon of 90 days United States Steel is expected to generate 0.93 times more return on investment than First Solar. However, United States Steel is 1.08 times less risky than First Solar. It trades about 0.3 of its potential returns per unit of risk. First Solar is currently generating about -0.25 per unit of risk. If you would invest 67,941 in United States Steel on November 8, 2024 and sell it today you would earn a total of 11,857 from holding United States Steel or generate 17.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. First Solar
Performance |
| Timeline |
| United States Steel |
| First Solar |
United States and First Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and First Solar
The main advantage of trading using opposite United States and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Steel Dynamics | United States vs. Ternium SA | United States vs. Industrias CH S | United States vs. Companhia Siderrgica Nacional |
| First Solar vs. Southern Copper | First Solar vs. McEwen Mining | First Solar vs. FIBRA Storage | First Solar vs. Monster Beverage Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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