Correlation Between First Solar and Arrowhead Pharmaceuticals

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Can any of the company-specific risk be diversified away by investing in both First Solar and Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Solar and Arrowhead Pharmaceuticals, you can compare the effects of market volatilities on First Solar and Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Solar and Arrowhead Pharmaceuticals.

Diversification Opportunities for First Solar and Arrowhead Pharmaceuticals

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between First and Arrowhead is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding First Solar and Arrowhead Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrowhead Pharmaceuticals has no effect on the direction of First Solar i.e., First Solar and Arrowhead Pharmaceuticals go up and down completely randomly.

Pair Corralation between First Solar and Arrowhead Pharmaceuticals

Given the investment horizon of 90 days First Solar is expected to generate 0.55 times more return on investment than Arrowhead Pharmaceuticals. However, First Solar is 1.8 times less risky than Arrowhead Pharmaceuticals. It trades about 0.16 of its potential returns per unit of risk. Arrowhead Pharmaceuticals is currently generating about 0.02 per unit of risk. If you would invest  15,362  in First Solar on September 5, 2022 and sell it today you would earn a total of  1,470  from holding First Solar or generate 9.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First Solar  vs.  Arrowhead Pharmaceuticals

 Performance (%) 
       Timeline  
First Solar 
First Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in First Solar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, First Solar reported solid returns over the last few months and may actually be approaching a breakup point.

First Price Channel

Arrowhead Pharmaceuticals 
Arrowhead Performance
0 of 100
Over the last 90 days Arrowhead Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Arrowhead Pharmaceuticals is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Arrowhead Price Channel

First Solar and Arrowhead Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Solar and Arrowhead Pharmaceuticals

The main advantage of trading using opposite First Solar and Arrowhead Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Solar position performs unexpectedly, Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals will offset losses from the drop in Arrowhead Pharmaceuticals' long position.
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The idea behind First Solar and Arrowhead Pharmaceuticals 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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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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