Correlation Between Enphase Energy and CVD Equipment

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

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

Diversification Opportunities for Enphase Energy and CVD Equipment

0.04

Correlation Coefficient

Enphase Energy  CVD Equipment

Significant diversification

The 3 months correlation between Enphase and CVD is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and CVD Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVD Equipment 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 CVD Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVD Equipment has no effect on the direction of Enphase Energy i.e., Enphase Energy and CVD Equipment go up and down completely randomly.

Pair Corralation between Enphase Energy and CVD Equipment

Given the investment horizon of 90 days Enphase Energy is expected to under-perform the CVD Equipment. But the stock apears to be less risky and, when comparing its historical volatility, Enphase Energy is 1.24 times less risky than CVD Equipment. The stock trades about -0.04 of its potential returns per unit of risk. The CVD Equipment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  545.00  in CVD Equipment on September 26, 2024 and sell it today you would lose (163.00) from holding CVD Equipment or give up 29.91% of portfolio value over 90 days.

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

Enphase Energy  vs.  CVD Equipment

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.

CVD Equipment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVD Equipment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CVD Equipment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enphase Energy and CVD Equipment

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

The idea behind Enphase Energy and CVD Equipment 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.