Correlation Between STMicroelectronics and First Solar

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

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

Diversification Opportunities for STMicroelectronics and First Solar

-0.72

Correlation Coefficient

STMicroelectronics  First Solar

Pay attention - limited upside

The 3 months correlation between STMicroelectronics and First is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and STMicroelectronics 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 STMicroelectronics NV ADR 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 STMicroelectronics i.e., STMicroelectronics and First Solar go up and down completely randomly.

Pair Corralation between STMicroelectronics and First Solar

Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the First Solar. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV ADR is 1.12 times less risky than First Solar. The stock trades about -0.03 of its potential returns per unit of risk. The First Solar is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  21,249  in First Solar on September 19, 2025 and sell it today you would earn a total of  4,154  from holding First Solar or generate 19.55% return on investment over 90 days.

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

STMicroelectronics NV ADR  vs.  First Solar

STMicroelectronics NV ADR

Risk-Adjusted Performance

Weakest

Over the last 90 days STMicroelectronics NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, STMicroelectronics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

First Solar

Risk-Adjusted Performance

Fair

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 unsteady essential indicators, First Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and First Solar

The main advantage of trading using opposite STMicroelectronics and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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 STMicroelectronics NV ADR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.