Correlation Between Enphase Energy and Meta Platforms

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

Diversification Opportunities for Enphase Energy and Meta Platforms

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Enphase and Meta is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Enphase Energy i.e., Enphase Energy and Meta Platforms go up and down completely randomly.

Pair Corralation between Enphase Energy and Meta Platforms

If you would invest  12,111  in Enphase Energy on December 29, 2023 and sell it today you would lose (131.00) from holding Enphase Energy or give up 1.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy4.55%
ValuesDaily Returns

Enphase Energy  vs.  Meta Platforms

 Performance 
       Timeline  
Enphase Energy 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days Enphase Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Enphase Energy is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.
Meta Platforms 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Meta Platforms is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Enphase Energy and Meta Platforms Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Enphase Energy and Meta Platforms

The main advantage of trading using opposite Enphase Energy and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enphase Energy position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.
The idea behind Enphase Energy and Meta Platforms 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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