Correlation Between Shoals Technologies and Enphase Energy

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

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

Diversification Opportunities for Shoals Technologies and Enphase Energy

0.83

Correlation Coefficient

Shoals Technologies  Enphase Energy

Very poor diversification

The 3 months correlation between Shoals and Enphase is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Shoals Technologies Group and Enphase Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enphase Energy and Shoals Technologies 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 Shoals Technologies Group 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 Shoals Technologies i.e., Shoals Technologies and Enphase Energy go up and down completely randomly.

Pair Corralation between Shoals Technologies and Enphase Energy

Given the investment horizon of 90 days Shoals Technologies Group is expected to under-perform the Enphase Energy. In addition to that, Shoals Technologies is 1.58 times more volatile than Enphase Energy. It trades about -0.12 of its total potential returns per unit of risk. Enphase Energy is currently generating about -0.06 per unit of volatility. 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	Strong
Accuracy	100.0%
Values	Daily Returns

Shoals Technologies Group  vs.  Enphase Energy

Shoals Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shoals Technologies Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential 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.

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.

Pair Trading with Shoals Technologies and Enphase Energy

The main advantage of trading using opposite Shoals Technologies and Enphase Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoals Technologies 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 Shoals Technologies Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.