Correlation Between Enphase Energy and Ascent Solar

Can any of the company-specific risk be diversified away by investing in both Enphase Energy and Ascent 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 Ascent 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 Ascent Solar Technologies, you can compare the effects of market volatilities on Enphase Energy and Ascent 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 Ascent Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enphase Energy and Ascent Solar.

Diversification Opportunities for Enphase Energy and Ascent Solar

0.15

Correlation Coefficient

Enphase Energy  Ascent Solar

Average diversification

The 3 months correlation between Enphase and Ascent is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and Ascent Solar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascent Solar Technologies 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 Ascent Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascent Solar Technologies has no effect on the direction of Enphase Energy i.e., Enphase Energy and Ascent Solar go up and down completely randomly.

Pair Corralation between Enphase Energy and Ascent Solar

Given the investment horizon of 90 days Enphase Energy is expected to generate 1.12 times less return on investment than Ascent Solar. But when comparing it to its historical volatility, Enphase Energy is 4.23 times less risky than Ascent Solar. It trades about 0.17 of its potential returns per unit of risk. Ascent Solar Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Ascent Solar Technologies on March 19, 2024 and sell it today you would lose (1.00) from holding Ascent Solar Technologies or give up 9.09% of portfolio value over 90 days.

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

Enphase Energy  vs.  Ascent Solar Technologies

Enphase Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enphase Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Enphase Energy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Ascent Solar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ascent Solar Technologies 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 fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Enphase Energy and Ascent Solar

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

The idea behind Enphase Energy and Ascent Solar Technologies 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.