Correlation Between SunPower and Enterprise Products
Can any of the company-specific risk be diversified away by investing in both SunPower and Enterprise Products 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 SunPower and Enterprise Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SunPower and Enterprise Products Partners, you can compare the effects of market volatilities on SunPower and Enterprise Products 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 SunPower with a short position of Enterprise Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of SunPower and Enterprise Products.
Diversification Opportunities for SunPower and Enterprise Products
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SunPower and Enterprise is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding SunPower and Enterprise Products Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Products and SunPower 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 SunPower are associated (or correlated) with Enterprise Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Products has no effect on the direction of SunPower i.e., SunPower and Enterprise Products go up and down completely randomly.
Pair Corralation between SunPower and Enterprise Products
Given the investment horizon of 90 days SunPower is expected to under-perform the Enterprise Products. In addition to that, SunPower is 5.22 times more volatile than Enterprise Products Partners. It trades about -0.06 of its total potential returns per unit of risk. Enterprise Products Partners is currently generating about 0.05 per unit of volatility. If you would invest 2,367 in Enterprise Products Partners on January 24, 2024 and sell it today you would earn a total of 533.00 from holding Enterprise Products Partners or generate 22.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SunPower vs. Enterprise Products Partners
Performance |
| Timeline |
| SunPower |
| Enterprise Products |
SunPower and Enterprise Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SunPower and Enterprise Products
The main advantage of trading using opposite SunPower and Enterprise Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SunPower position performs unexpectedly, Enterprise Products 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 Enterprise Products will offset losses from the drop in Enterprise Products' long position.The idea behind SunPower and Enterprise Products Partners 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.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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