Correlation Between Sunrun and First Solar

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

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

Diversification Opportunities for Sunrun and First Solar

0.84

Correlation Coefficient

Sunrun  First Solar

Very poor diversification

The 3 months correlation between Sunrun and First is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sunrun Inc and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and Sunrun 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 Sunrun 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 Sunrun i.e., Sunrun and First Solar go up and down completely randomly.

Pair Corralation between Sunrun and First Solar

Considering the 90-day investment horizon Sunrun Inc is expected to generate 1.59 times more return on investment than First Solar. However, Sunrun is 1.59 times more volatile than First Solar. It trades about 0.01 of its potential returns per unit of risk. First Solar is currently generating about 0.01 per unit of risk. If you would invest  1,795  in Sunrun Inc on February 16, 2025 and sell it today you would lose (570.00) from holding Sunrun Inc or give up 31.75% of portfolio value over 90 days.

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

Sunrun Inc  vs.  First Solar

Sunrun Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunrun Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Sunrun displayed solid returns over the last few months and may actually be approaching a breakup point.

First Solar

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Solar are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent essential indicators, First Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunrun and First Solar

The main advantage of trading using opposite Sunrun and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunrun 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 Sunrun 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.