Correlation Between Sunnova Energy and MACOM Technology

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

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

Diversification Opportunities for Sunnova Energy and MACOM Technology

-0.69

Correlation Coefficient

Sunnova Energy  MACOM Technology

Excellent diversification

The 3 months correlation between Sunnova and MACOM is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sunnova Energy International and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol and Sunnova 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 Sunnova Energy International are associated (or correlated) with MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of Sunnova Energy i.e., Sunnova Energy and MACOM Technology go up and down completely randomly.

Pair Corralation between Sunnova Energy and MACOM Technology

Given the investment horizon of 90 days Sunnova Energy International is expected to under-perform the MACOM Technology. In addition to that, Sunnova Energy is 3.01 times more volatile than MACOM Technology Solutions. It trades about -0.06 of its total potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.11 per unit of volatility. If you would invest  6,009  in MACOM Technology Solutions on February 22, 2024 and sell it today you would earn a total of  4,227  from holding MACOM Technology Solutions or generate 70.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sunnova Energy International  vs.  MACOM Technology Solutions

Sunnova Energy Inter

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

MACOM Technology Sol

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunnova Energy and MACOM Technology

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

The idea behind Sunnova Energy International and MACOM Technology Solutions 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.