Correlation Between Enphase Energy and ASML Holding

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

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

Diversification Opportunities for Enphase Energy and ASML Holding

0.48

Correlation Coefficient

Enphase Energy  ASML Holding

Very weak diversification

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

Pair Corralation between Enphase Energy and ASML Holding

Assuming the 90 days horizon Enphase Energy is expected to under-perform the ASML Holding. In addition to that, Enphase Energy is 1.38 times more volatile than ASML Holding NV. It trades about -0.07 of its total potential returns per unit of risk. ASML Holding NV is currently generating about -0.02 per unit of volatility. 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

Enphase Energy  vs.  ASML Holding NV

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.

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.

Pair Trading with Enphase Energy and ASML Holding

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

The idea behind Enphase Energy and ASML Holding NV 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.