Correlation Between First Solar and Diodes Incorporated
Can any of the company-specific risk be diversified away by investing in both First Solar and Diodes Incorporated 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 Diodes Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Solar and Diodes Incorporated, you can compare the effects of market volatilities on First Solar and Diodes Incorporated 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 Diodes Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Solar and Diodes Incorporated.
Diversification Opportunities for First Solar and Diodes Incorporated
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Diodes is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated 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 Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of First Solar i.e., First Solar and Diodes Incorporated go up and down completely randomly.
Pair Corralation between First Solar and Diodes Incorporated
Given the investment horizon of 90 days First Solar is expected to generate 1.35 times more return on investment than Diodes Incorporated. However, First Solar is 1.35 times more volatile than Diodes Incorporated. It trades about 0.01 of its potential returns per unit of risk. Diodes Incorporated is currently generating about -0.03 per unit of risk. If you would invest 19,568 in First Solar on January 25, 2024 and sell it today you would lose (1,558) from holding First Solar or give up 7.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Solar vs. Diodes Incorporated
Performance |
| Timeline |
| First Solar |
| Diodes Incorporated |
First Solar and Diodes Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Solar and Diodes Incorporated
The main advantage of trading using opposite First Solar and Diodes Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Solar position performs unexpectedly, Diodes Incorporated 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 Diodes Incorporated will offset losses from the drop in Diodes Incorporated's long position.The idea behind First Solar and Diodes Incorporated 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. |