Correlation Between Enphase Energy and Tokyo Electron

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

By analyzing existing cross correlation between Enphase Energy and Tokyo Electron Limited, you can compare the effects of market volatilities on Enphase Energy and Tokyo Electron 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 Tokyo Electron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enphase Energy and Tokyo Electron.

Diversification Opportunities for Enphase Energy and Tokyo Electron

0.52

Correlation Coefficient

Enphase Energy  Tokyo Electron

Very weak diversification

The 3 months correlation between Enphase and Tokyo is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and Tokyo Electron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron 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 Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of Enphase Energy i.e., Enphase Energy and Tokyo Electron go up and down completely randomly.

Pair Corralation between Enphase Energy and Tokyo Electron

Assuming the 90 days horizon Enphase Energy is expected to under-perform the Tokyo Electron. In addition to that, Enphase Energy is 1.23 times more volatile than Tokyo Electron Limited. It trades about -0.07 of its total potential returns per unit of risk. Tokyo Electron Limited is currently generating about -0.03 per unit of volatility. If you would invest  14,540  in Tokyo Electron Limited on December 29, 2024 and sell it today you would lose (995.00) from holding Tokyo Electron Limited or give up 6.84% 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.  Tokyo Electron Limited

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.

Tokyo Electron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tokyo Electron Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tokyo Electron is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Enphase Energy and Tokyo Electron

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

The idea behind Enphase Energy and Tokyo Electron Limited 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.