Correlation Between Enphase Energy and Indie Semiconductor

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

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

Diversification Opportunities for Enphase Energy and Indie Semiconductor

-0.55

Correlation Coefficient

Enphase Energy  Indie Semiconductor

Excellent diversification

The 3 months correlation between Enphase and Indie is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and indie Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on indie Semiconductor 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 Indie Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of indie Semiconductor has no effect on the direction of Enphase Energy i.e., Enphase Energy and Indie Semiconductor go up and down completely randomly.

Pair Corralation between Enphase Energy and Indie Semiconductor

Given the investment horizon of 90 days Enphase Energy is expected to under-perform the Indie Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Enphase Energy is 1.76 times less risky than Indie Semiconductor. The stock trades about -0.04 of its potential returns per unit of risk. The indie Semiconductor is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  617.00  in indie Semiconductor on September 26, 2024 and sell it today you would lose (193.00) from holding indie Semiconductor or give up 31.28% 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.  indie Semiconductor

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.

indie Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in indie Semiconductor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Indie Semiconductor demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enphase Energy and Indie Semiconductor

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

The idea behind Enphase Energy and indie Semiconductor 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..