Correlation Between Enphase Energy and Teradyne

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

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

Diversification Opportunities for Enphase Energy and Teradyne

0.75

Correlation Coefficient

Enphase Energy  Teradyne

Poor diversification

The 3 months correlation between Enphase and Teradyne is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of Enphase Energy i.e., Enphase Energy and Teradyne go up and down completely randomly.

Pair Corralation between Enphase Energy and Teradyne

Given the investment horizon of 90 days Enphase Energy is expected to generate 5.12 times less return on investment than Teradyne. In addition to that, Enphase Energy is 1.71 times more volatile than Teradyne. It trades about 0.04 of its total potential returns per unit of risk. Teradyne is currently generating about 0.37 per unit of volatility. If you would invest  11,067  in Teradyne on September 25, 2024 and sell it today you would earn a total of  1,929  from holding Teradyne or generate 17.43% return on investment over 90 days.

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

Enphase Energy  vs.  Teradyne

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.

Teradyne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teradyne has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Teradyne is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Enphase Energy and Teradyne

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

The idea behind Enphase Energy and Teradyne 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.