Correlation Between Enphase Energy and FTC Solar
Can any of the company-specific risk be diversified away by investing in both Enphase Energy and FTC Solar 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 Enphase Energy and FTC Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enphase Energy and FTC Solar, you can compare the effects of market volatilities on Enphase Energy and FTC Solar 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 Enphase Energy with a short position of FTC Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enphase Energy and FTC Solar.
Diversification Opportunities for Enphase Energy and FTC Solar
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Enphase and FTC is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and FTC Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTC Solar and Enphase Energy 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 Enphase Energy are associated (or correlated) with FTC Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTC Solar has no effect on the direction of Enphase Energy i.e., Enphase Energy and FTC Solar go up and down completely randomly.
Pair Corralation between Enphase Energy and FTC Solar
Given the investment horizon of 90 days Enphase Energy is expected to generate 1.1 times more return on investment than FTC Solar. However, Enphase Energy is 1.1 times more volatile than FTC Solar. It trades about -0.18 of its potential returns per unit of risk. FTC Solar is currently generating about -0.47 per unit of risk. If you would invest 8,383 in Enphase Energy on August 26, 2024 and sell it today you would lose (1,754) from holding Enphase Energy or give up 20.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enphase Energy vs. FTC Solar
Performance |
| Timeline |
| Enphase Energy |
| FTC Solar |
Enphase Energy and FTC Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enphase Energy and FTC Solar
The main advantage of trading using opposite Enphase Energy and FTC Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enphase Energy position performs unexpectedly, FTC Solar 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 FTC Solar will offset losses from the drop in FTC Solar's long position.The idea behind Enphase Energy and FTC Solar 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.| FTC Solar vs. Sunnova Energy International | FTC Solar vs. JinkoSolar Holding | FTC Solar vs. Nextracker Class A | FTC Solar vs. Canadian Solar |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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