Correlation Between Newhydrogen and Enphase Energy

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

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

Diversification Opportunities for Newhydrogen and Enphase Energy

0.85

Correlation Coefficient

Newhydrogen  Enphase Energy

Very poor diversification

The 3 months correlation between Newhydrogen and Enphase is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Newhydrogen and Enphase Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enphase Energy and Newhydrogen 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 Newhydrogen are associated (or correlated) with Enphase Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enphase Energy has no effect on the direction of Newhydrogen i.e., Newhydrogen and Enphase Energy go up and down completely randomly.

Pair Corralation between Newhydrogen and Enphase Energy

Given the investment horizon of 90 days Newhydrogen is expected to generate 2.3 times less return on investment than Enphase Energy. In addition to that, Newhydrogen is 3.91 times more volatile than Enphase Energy. It trades about 0.04 of its total potential returns per unit of risk. Enphase Energy is currently generating about 0.32 per unit of volatility. If you would invest  5,952  in Enphase Energy on September 16, 2024 and sell it today you would earn a total of  1,432  from holding Enphase Energy or generate 24.06% return on investment over 90 days.

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

Newhydrogen  vs.  Enphase Energy

Newhydrogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newhydrogen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

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.

Pair Trading with Newhydrogen and Enphase Energy

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

The idea behind Newhydrogen and Enphase Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.