Correlation Between Enphase Energy and Carsales

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

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

Diversification Opportunities for Enphase Energy and Carsales

-0.76

Correlation Coefficient

Enphase Energy  Carsales

Pay attention - limited upside

The 3 months correlation between Enphase and Carsales is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of Enphase Energy i.e., Enphase Energy and Carsales go up and down completely randomly.

Pair Corralation between Enphase Energy and Carsales

Assuming the 90 days horizon Enphase Energy is expected to under-perform the Carsales. In addition to that, Enphase Energy is 3.0 times more volatile than Carsales. It trades about -0.1 of its total potential returns per unit of risk. Carsales is currently generating about 0.06 per unit of volatility. If you would invest  2,220  in Carsales on September 14, 2024 and sell it today you would earn a total of  120.00  from holding Carsales or generate 5.41% return on investment over 90 days.

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

Enphase Energy  vs.  Carsales

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.

Carsales

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carsales are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carsales is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Enphase Energy and Carsales

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

The idea behind Enphase Energy and Carsales 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.