Correlation Between ASML Holding and Enphase Energy

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

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

Diversification Opportunities for ASML Holding and Enphase Energy

0.48

Correlation Coefficient

ASML Holding  Enphase Energy

Very weak diversification

The 3 months correlation between ASML and Enphase is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Enphase Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enphase Energy and ASML Holding 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 ASML Holding NV are associated (or correlated) with Enphase Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enphase Energy has no effect on the direction of ASML Holding i.e., ASML Holding and Enphase Energy go up and down completely randomly.

Pair Corralation between ASML Holding and Enphase Energy

Assuming the 90 days trading horizon ASML Holding NV is expected to generate 0.72 times more return on investment than Enphase Energy. However, ASML Holding NV is 1.38 times less risky than Enphase Energy. It trades about -0.02 of its potential returns per unit of risk. Enphase Energy is currently generating about -0.07 per unit of risk. If you would invest  67,564  in ASML Holding NV on December 28, 2024 and sell it today you would lose (3,274) from holding ASML Holding NV or give up 4.85% of portfolio value over 90 days.

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

ASML Holding NV  vs.  Enphase Energy

ASML Holding NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASML Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ASML Holding is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Enphase Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enphase Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ASML Holding and Enphase Energy

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

The idea behind ASML Holding NV and Enphase Energy 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.