Correlation Between First Solar and Benchmark Electronics

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Can any of the company-specific risk be diversified away by investing in both First Solar and Benchmark Electronics 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 Benchmark Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Solar and Benchmark Electronics, you can compare the effects of market volatilities on First Solar and Benchmark Electronics 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 Benchmark Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Solar and Benchmark Electronics.

Diversification Opportunities for First Solar and Benchmark Electronics

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between First and Benchmark is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics 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 Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of First Solar i.e., First Solar and Benchmark Electronics go up and down completely randomly.

Pair Corralation between First Solar and Benchmark Electronics

Given the investment horizon of 90 days First Solar is expected to generate 1.59 times more return on investment than Benchmark Electronics. However, First Solar is 1.59 times more volatile than Benchmark Electronics. It trades about 0.25 of its potential returns per unit of risk. Benchmark Electronics is currently generating about 0.0 per unit of risk. If you would invest  14,499  in First Solar on December 29, 2023 and sell it today you would earn a total of  2,246  from holding First Solar or generate 15.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First Solar  vs.  Benchmark Electronics

 Performance 
       Timeline  
First Solar 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days First Solar has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, First Solar is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
Benchmark Electronics 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, Benchmark Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2024.

First Solar and Benchmark Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Solar and Benchmark Electronics

The main advantage of trading using opposite First Solar and Benchmark Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Solar position performs unexpectedly, Benchmark Electronics 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 Benchmark Electronics will offset losses from the drop in Benchmark Electronics' long position.
The idea behind First Solar and Benchmark Electronics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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