Correlation Between Enphase Energy and MACOM Technology

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

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

Diversification Opportunities for Enphase Energy and MACOM Technology

-0.82

Correlation Coefficient

Enphase Energy  MACOM Technology

Pay attention - limited upside

The 3 months correlation between Enphase and MACOM is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol 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 MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of Enphase Energy i.e., Enphase Energy and MACOM Technology go up and down completely randomly.

Pair Corralation between Enphase Energy and MACOM Technology

Given the investment horizon of 90 days Enphase Energy is expected to under-perform the MACOM Technology. In addition to that, Enphase Energy is 1.6 times more volatile than MACOM Technology Solutions. It trades about -0.13 of its total potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.15 per unit of volatility. If you would invest  10,614  in MACOM Technology Solutions on September 25, 2024 and sell it today you would earn a total of  2,968  from holding MACOM Technology Solutions or generate 27.96% return on investment over 90 days.

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

Enphase Energy  vs.  MACOM Technology Solutions

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.

MACOM Technology Sol

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enphase Energy and MACOM Technology

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

The idea behind Enphase Energy and MACOM Technology Solutions 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.