Correlation Between SMA Solar and Enphase Energy

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

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

Diversification Opportunities for SMA Solar and Enphase Energy

-0.03

Correlation Coefficient

SMA Solar  Enphase Energy

Good diversification

The 3 months correlation between SMA and Enphase is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Enphase Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enphase Energy and SMA Solar 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 SMA Solar Technology 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 SMA Solar i.e., SMA Solar and Enphase Energy go up and down completely randomly.

Pair Corralation between SMA Solar and Enphase Energy

Assuming the 90 days horizon SMA Solar Technology is expected to generate 1.53 times more return on investment than Enphase Energy. However, SMA Solar is 1.53 times more volatile than Enphase Energy. It trades about 0.09 of its potential returns per unit of risk. Enphase Energy is currently generating about -0.08 per unit of risk. If you would invest  134.00  in SMA Solar Technology on December 5, 2024 and sell it today you would earn a total of  28.00  from holding SMA Solar Technology or generate 20.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

SMA Solar Technology  vs.  Enphase Energy

SMA Solar Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SMA Solar Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, SMA Solar showed solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with SMA Solar and Enphase Energy

The main advantage of trading using opposite SMA Solar and Enphase Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar 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 SMA Solar Technology 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .