Correlation Between SunPower and Emeren

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

By analyzing existing cross correlation between SunPower and Emeren Group, you can compare the effects of market volatilities on SunPower and Emeren 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 Emeren. Check out your portfolio center. Please also check ongoing floating volatility patterns of SunPower and Emeren.

Diversification Opportunities for SunPower and Emeren

-0.07

Correlation Coefficient

SunPower  Emeren

Good diversification

The 3 months correlation between SunPower and Emeren is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding SunPower and Emeren Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emeren Group 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 Emeren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emeren Group has no effect on the direction of SunPower i.e., SunPower and Emeren go up and down completely randomly.

Pair Corralation between SunPower and Emeren

Given the investment horizon of 90 days SunPower is expected to under-perform the Emeren. But the stock apears to be less risky and, when comparing its historical volatility, SunPower is 1.29 times less risky than Emeren. The stock trades about -0.19 of its potential returns per unit of risk. The Emeren Group is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  214.00  in Emeren Group on January 20, 2024 and sell it today you would lose (44.00) from holding Emeren Group or give up 20.56% of portfolio value over 90 days.

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

SunPower  vs.  Emeren Group

SunPower

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SunPower has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Emeren Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emeren Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Emeren is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SunPower and Emeren

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

The idea behind SunPower and Emeren Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.