Correlation Between Enphase Energy and Sequans Communications

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

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

Diversification Opportunities for Enphase Energy and Sequans Communications

0.63

Correlation Coefficient

Enphase Energy  Sequans Communications

Poor diversification

The 3 months correlation between Enphase and Sequans is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and Sequans Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sequans Communications 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 Sequans Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sequans Communications has no effect on the direction of Enphase Energy i.e., Enphase Energy and Sequans Communications go up and down completely randomly.

Pair Corralation between Enphase Energy and Sequans Communications

Given the investment horizon of 90 days Enphase Energy is expected to generate 0.88 times more return on investment than Sequans Communications. However, Enphase Energy is 1.13 times less risky than Sequans Communications. It trades about -0.06 of its potential returns per unit of risk. Sequans Communications SA is currently generating about -0.15 per unit of risk. If you would invest  7,301  in Enphase Energy on December 26, 2024 and sell it today you would lose (1,024) from holding Enphase Energy or give up 14.03% of portfolio value over 90 days.

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

Enphase Energy  vs.  Sequans Communications SA

Enphase Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enphase Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Sequans Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sequans Communications SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Enphase Energy and Sequans Communications

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

The idea behind Enphase Energy and Sequans Communications SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.