Correlation Between First Solar and Eni SPA
Can any of the company-specific risk be diversified away by investing in both First Solar and Eni SPA 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 Eni SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Solar and Eni SpA ADR, you can compare the effects of market volatilities on First Solar and Eni SPA 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 Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Solar and Eni SPA.
Diversification Opportunities for First Solar and Eni SPA
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Eni is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Eni SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA ADR 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 Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA ADR has no effect on the direction of First Solar i.e., First Solar and Eni SPA go up and down completely randomly.
Pair Corralation between First Solar and Eni SPA
Given the investment horizon of 90 days First Solar is expected to generate 2.56 times more return on investment than Eni SPA. However, First Solar is 2.56 times more volatile than Eni SpA ADR. It trades about 0.22 of its potential returns per unit of risk. Eni SpA ADR is currently generating about 0.18 per unit of risk. If you would invest 14,925 in First Solar on December 30, 2023 and sell it today you would earn a total of 1,955 from holding First Solar or generate 13.1% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
First Solar vs. Eni SpA ADR
Performance |
Timeline |
First Solar |
Eni SpA ADR |
First Solar and Eni SPA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Solar and Eni SPA
The main advantage of trading using opposite First Solar and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Solar position performs unexpectedly, Eni SPA 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 Eni SPA will offset losses from the drop in Eni SPA's long position.First Solar vs. Sunnova Energy International | First Solar vs. Nextracker Class A | First Solar vs. Sunrun Inc | First Solar vs. Emeren Group |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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