Correlation Between First Solar and InTest

Can any of the company-specific risk be diversified away by investing in both First Solar and InTest 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 InTest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Solar and inTest, you can compare the effects of market volatilities on First Solar and InTest 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 InTest. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Solar and InTest.

Diversification Opportunities for First Solar and InTest

0.4

Correlation Coefficient

First Solar  InTest

Very weak diversification

The 3 months correlation between First and InTest is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and inTest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on inTest 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 InTest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of inTest has no effect on the direction of First Solar i.e., First Solar and InTest go up and down completely randomly.

Pair Corralation between First Solar and InTest

Given the investment horizon of 90 days First Solar is expected to generate 1.55 times more return on investment than InTest. However, First Solar is 1.55 times more volatile than inTest. It trades about 0.11 of its potential returns per unit of risk. inTest is currently generating about 0.11 per unit of risk. If you would invest  13,535  in First Solar on April 22, 2025 and sell it today you would earn a total of  4,050  from holding First Solar or generate 29.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

First Solar  vs.  inTest

First Solar

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Solar are ranked lower than 8 (%) 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.

inTest

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in inTest are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, InTest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Solar and InTest

The main advantage of trading using opposite First Solar and InTest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Solar position performs unexpectedly, InTest 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 InTest will offset losses from the drop in InTest's long position.

The idea behind First Solar and inTest 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.