Correlation Between Enphase Energy and Globalfoundries

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

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

Diversification Opportunities for Enphase Energy and Globalfoundries

-0.53

Correlation Coefficient

Enphase Energy  Globalfoundries

Excellent diversification

The 3 months correlation between Enphase and Globalfoundries is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Enphase Energy i.e., Enphase Energy and Globalfoundries go up and down completely randomly.

Pair Corralation between Enphase Energy and Globalfoundries

Given the investment horizon of 90 days Enphase Energy is expected to under-perform the Globalfoundries. In addition to that, Enphase Energy is 1.53 times more volatile than Globalfoundries. It trades about -0.04 of its total potential returns per unit of risk. Globalfoundries is currently generating about -0.02 per unit of volatility. If you would invest  5,866  in Globalfoundries on October 14, 2024 and sell it today you would lose (1,770) from holding Globalfoundries or give up 30.17% of portfolio value over 90 days.

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

Enphase Energy  vs.  Globalfoundries

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 February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Globalfoundries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globalfoundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Globalfoundries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Enphase Energy and Globalfoundries

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

The idea behind Enphase Energy and Globalfoundries 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..