Correlation Between Daqo New and Sunnova Energy

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Can any of the company-specific risk be diversified away by investing in both Daqo New and Sunnova 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 Daqo New and Sunnova Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daqo New Energy and Sunnova Energy International, you can compare the effects of market volatilities on Daqo New and Sunnova 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 Daqo New with a short position of Sunnova Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daqo New and Sunnova Energy.

Diversification Opportunities for Daqo New and Sunnova Energy

-0.66
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Daqo and Sunnova is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Daqo New Energy and Sunnova Energy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunnova Energy Inter and Daqo New 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 Daqo New Energy are associated (or correlated) with Sunnova Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunnova Energy Inter has no effect on the direction of Daqo New i.e., Daqo New and Sunnova Energy go up and down completely randomly.

Pair Corralation between Daqo New and Sunnova Energy

Allowing for the 90-day total investment horizon Daqo New Energy is expected to under-perform the Sunnova Energy. But the stock apears to be less risky and, when comparing its historical volatility, Daqo New Energy is 3.62 times less risky than Sunnova Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Sunnova Energy International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  538.00  in Sunnova Energy International on August 31, 2024 and sell it today you would earn a total of  3.00  from holding Sunnova Energy International or generate 0.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Daqo New Energy  vs.  Sunnova Energy International

 Performance 
       Timeline  
Daqo New Energy 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Daqo New Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Daqo New reported solid returns over the last few months and may actually be approaching a breakup point.
Sunnova Energy Inter 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sunnova Energy International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Daqo New and Sunnova Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Daqo New and Sunnova Energy

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

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