Correlation Between First Solar and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both First Solar and Microchip Technology 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 Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Solar and Microchip Technology, you can compare the effects of market volatilities on First Solar and Microchip Technology 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 Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Solar and Microchip Technology.
Diversification Opportunities for First Solar and Microchip Technology
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Microchip is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of First Solar i.e., First Solar and Microchip Technology go up and down completely randomly.
Pair Corralation between First Solar and Microchip Technology
Given the investment horizon of 90 days First Solar is expected to generate 1.13 times more return on investment than Microchip Technology. However, First Solar is 1.13 times more volatile than Microchip Technology. It trades about 0.27 of its potential returns per unit of risk. Microchip Technology is currently generating about 0.11 per unit of risk. If you would invest 15,316 in First Solar on January 26, 2024 and sell it today you would earn a total of 2,432 from holding First Solar or generate 15.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Solar vs. Microchip Technology
Performance |
| Timeline |
| First Solar |
| Microchip Technology |
First Solar and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Solar and Microchip Technology
The main advantage of trading using opposite First Solar and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Solar position performs unexpectedly, Microchip Technology 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 Microchip Technology will offset losses from the drop in Microchip Technology's long position.| First Solar vs. Sunnova Energy International | First Solar vs. Nextracker Class A | First Solar vs. Sunrun Inc |
| Microchip Technology vs. Texas Instruments Incorporated | Microchip Technology vs. ON Semiconductor | Microchip Technology vs. Analog Devices | Microchip Technology vs. Qorvo Inc |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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