Correlation Between AEGEAN AIRLINES and Enphase Energy

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

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

Diversification Opportunities for AEGEAN AIRLINES and Enphase Energy

0.9

Correlation Coefficient

AEGEAN AIRLINES  Enphase Energy

Almost no diversification

The 3 months correlation between AEGEAN and Enphase is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding AEGEAN AIRLINES and Enphase Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enphase Energy and AEGEAN AIRLINES 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 AEGEAN AIRLINES are associated (or correlated) with Enphase Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enphase Energy has no effect on the direction of AEGEAN AIRLINES i.e., AEGEAN AIRLINES and Enphase Energy go up and down completely randomly.

Pair Corralation between AEGEAN AIRLINES and Enphase Energy

Assuming the 90 days trading horizon AEGEAN AIRLINES is expected to under-perform the Enphase Energy. But the stock apears to be less risky and, when comparing its historical volatility, AEGEAN AIRLINES is 2.67 times less risky than Enphase Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Enphase Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  8,995  in Enphase Energy on September 14, 2024 and sell it today you would lose (1,954) from holding Enphase Energy or give up 21.72% of portfolio value over 90 days.

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

AEGEAN AIRLINES  vs.  Enphase Energy

AEGEAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEGEAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Enphase Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enphase Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AEGEAN AIRLINES and Enphase Energy

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

The idea behind AEGEAN AIRLINES and Enphase Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.