Correlation Between Enphase Energy and Sitime

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

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

Diversification Opportunities for Enphase Energy and Sitime

-0.7

Correlation Coefficient

Enphase Energy  Sitime

Excellent diversification

The 3 months correlation between Enphase and Sitime is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and Sitime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitime 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 Sitime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitime has no effect on the direction of Enphase Energy i.e., Enphase Energy and Sitime go up and down completely randomly.

Pair Corralation between Enphase Energy and Sitime

Given the investment horizon of 90 days Enphase Energy is expected to under-perform the Sitime. In addition to that, Enphase Energy is 1.03 times more volatile than Sitime. It trades about -0.04 of its total potential returns per unit of risk. Sitime is currently generating about 0.06 per unit of volatility. If you would invest  9,837  in Sitime on September 26, 2024 and sell it today you would earn a total of  12,109  from holding Sitime or generate 123.1% return on investment over 90 days.

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

Enphase Energy  vs.  Sitime

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.

Sitime

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sitime are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Sitime displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enphase Energy and Sitime

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

The idea behind Enphase Energy and Sitime 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.