Correlation Between NLIGHT and First Solar

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

By analyzing existing cross correlation between nLIGHT Inc and First Solar, you can compare the effects of market volatilities on NLIGHT and First Solar 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 NLIGHT with a short position of First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of NLIGHT and First Solar.

Diversification Opportunities for NLIGHT and First Solar

0.66

Correlation Coefficient

NLIGHT  First Solar

Poor diversification

The 3 months correlation between NLIGHT and First is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and NLIGHT 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 nLIGHT Inc are associated (or correlated) with First Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of NLIGHT i.e., NLIGHT and First Solar go up and down completely randomly.

Pair Corralation between NLIGHT and First Solar

Given the investment horizon of 90 days nLIGHT Inc is expected to generate 1.07 times more return on investment than First Solar. However, NLIGHT is 1.07 times more volatile than First Solar. It trades about 0.31 of its potential returns per unit of risk. First Solar is currently generating about 0.13 per unit of risk. If you would invest  796.00  in nLIGHT Inc on May 1, 2025 and sell it today you would earn a total of  1,274  from holding nLIGHT Inc or generate 160.05% return on investment over 90 days.

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

nLIGHT Inc  vs.  First Solar

nLIGHT Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in nLIGHT Inc are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, NLIGHT reported solid returns over the last few months and may actually be approaching a breakup point.

First Solar

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Solar are ranked lower than 10 (%) 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.

Pair Trading with NLIGHT and First Solar

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

The idea behind nLIGHT Inc and First Solar 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.