Correlation Between First Solar and SMA Solar
Can any of the company-specific risk be diversified away by investing in both First Solar and SMA 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 First Solar and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Solar and SMA Solar Technology, you can compare the effects of market volatilities on First Solar and SMA 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 First Solar with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Solar and SMA Solar.
Diversification Opportunities for First Solar and SMA Solar
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and SMA is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of First Solar i.e., First Solar and SMA Solar go up and down completely randomly.
Pair Corralation between First Solar and SMA Solar
Assuming the 90 days horizon First Solar is expected to generate 1.82 times less return on investment than SMA Solar. But when comparing it to its historical volatility, First Solar is 1.35 times less risky than SMA Solar. It trades about 0.17 of its potential returns per unit of risk. SMA Solar Technology is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,680 in SMA Solar Technology on August 31, 2025 and sell it today you would earn a total of 710.00 from holding SMA Solar Technology or generate 26.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Solar vs. SMA Solar Technology
Performance |
| Timeline |
| First Solar |
| SMA Solar Technology |
First Solar and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Solar and SMA Solar
The main advantage of trading using opposite First Solar and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Solar position performs unexpectedly, SMA 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 SMA Solar will offset losses from the drop in SMA Solar's long position.| First Solar vs. Ramsay Health Care | First Solar vs. China Eastern Airlines | First Solar vs. Sims Metal Management | First Solar vs. CEOTRONICS |
| SMA Solar vs. SIDETRADE EO 1 | SMA Solar vs. Sun Art Retail | SMA Solar vs. Tradeweb Markets | SMA Solar vs. Shenzhen Investment Limited |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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