Correlation Between Enphase Energy and Xperi Corp

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

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

Diversification Opportunities for Enphase Energy and Xperi Corp

-0.1

Correlation Coefficient

Enphase Energy  Xperi Corp

Good diversification

The 3 months correlation between Enphase and Xperi is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and Xperi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xperi Corp 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 Xperi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xperi Corp has no effect on the direction of Enphase Energy i.e., Enphase Energy and Xperi Corp go up and down completely randomly.

Pair Corralation between Enphase Energy and Xperi Corp

Given the investment horizon of 90 days Enphase Energy is expected to generate 1.55 times more return on investment than Xperi Corp. However, Enphase Energy is 1.55 times more volatile than Xperi Corp. It trades about -0.13 of its potential returns per unit of risk. Xperi Corp is currently generating about -0.34 per unit of risk. If you would invest  7,384  in Enphase Energy on October 14, 2024 and sell it today you would lose (710.00) from holding Enphase Energy or give up 9.62% of portfolio value over 90 days.

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

Enphase Energy  vs.  Xperi Corp

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 February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Xperi Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xperi Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Xperi Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Enphase Energy and Xperi Corp

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

The idea behind Enphase Energy and Xperi Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.