Correlation Between First Solar and Ambarella

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

Diversification Opportunities for First Solar and Ambarella

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between First and Ambarella is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Ambarella in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambarella 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 Ambarella. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambarella has no effect on the direction of First Solar i.e., First Solar and Ambarella go up and down completely randomly.

Pair Corralation between First Solar and Ambarella

Given the investment horizon of 90 days First Solar is expected to generate 1.25 times more return on investment than Ambarella. However, First Solar is 1.25 times more volatile than Ambarella. It trades about 0.14 of its potential returns per unit of risk. Ambarella is currently generating about 0.16 per unit of risk. If you would invest  12,657  in First Solar on May 1, 2025 and sell it today you would earn a total of  5,525  from holding First Solar or generate 43.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

First Solar  vs.  Ambarella

 Performance 
       Timeline  
First Solar 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in First Solar are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile essential indicators, First Solar reported solid returns over the last few months and may actually be approaching a breakup point.
Ambarella 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ambarella are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Ambarella sustained solid returns over the last few months and may actually be approaching a breakup point.

First Solar and Ambarella Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Solar and Ambarella

The main advantage of trading using opposite First Solar and Ambarella positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Solar position performs unexpectedly, Ambarella 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 Ambarella will offset losses from the drop in Ambarella's long position.
The idea behind First Solar and Ambarella 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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