Correlation Between Applied Materials and Enphase Energy
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and Enphase Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Enphase Energy, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Enphase Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Enphase Energy.
Diversification Opportunities for Applied Materials and Enphase Energy
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Applied and Enphase is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Enphase Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enphase Energy and Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Enphase Energy go up and down completely randomly.
Pair Corralation between Applied Materials and Enphase Energy
Assuming the 90 days horizon Applied Materials is expected to generate 0.59 times more return on investment than Enphase Energy. However, Applied Materials is 1.68 times less risky than Enphase Energy. It trades about 0.05 of its potential returns per unit of risk. Enphase Energy is currently generating about -0.06 per unit of risk. If you would invest 9,857 in Applied Materials on August 24, 2024 and sell it today you would earn a total of 6,009 from holding Applied Materials or generate 60.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Applied Materials vs. Enphase Energy
Performance |
| Timeline |
| Applied Materials |
| Enphase Energy |
Applied Materials and Enphase Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Enphase Energy
The main advantage of trading using opposite Applied Materials and Enphase Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. Beazer Homes USA | Applied Materials vs. INVITATION HOMES DL | Applied Materials vs. SOUTHWEST AIRLINES | Applied Materials vs. HomeToGo SE |
| Enphase Energy vs. ASML HOLDING NY | Enphase Energy vs. Applied Materials | Enphase Energy vs. Lam Research | Enphase Energy vs. Superior Plus Corp |
Check out your portfolio center.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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