Correlation Between Enphase Energy and Cirrus Logic

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

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

Diversification Opportunities for Enphase Energy and Cirrus Logic

0.84

Correlation Coefficient

Enphase Energy  Cirrus Logic

Very poor diversification

The 3 months correlation between Enphase and Cirrus is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and Cirrus Logic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cirrus Logic 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 Cirrus Logic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cirrus Logic has no effect on the direction of Enphase Energy i.e., Enphase Energy and Cirrus Logic go up and down completely randomly.

Pair Corralation between Enphase Energy and Cirrus Logic

Given the investment horizon of 90 days Enphase Energy is expected to under-perform the Cirrus Logic. In addition to that, Enphase Energy is 1.77 times more volatile than Cirrus Logic. It trades about -0.04 of its total potential returns per unit of risk. Cirrus Logic is currently generating about 0.04 per unit of volatility. If you would invest  7,543  in Cirrus Logic on September 26, 2024 and sell it today you would earn a total of  2,719  from holding Cirrus Logic or generate 36.05% return on investment over 90 days.

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

Enphase Energy  vs.  Cirrus Logic

Enphase Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enphase Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Cirrus Logic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cirrus Logic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Enphase Energy and Cirrus Logic

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

The idea behind Enphase Energy and Cirrus Logic 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.

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 the Global Correlations module to find global opportunities by holding instruments from different markets.