Correlation Between Enphase Energy, and Mastercard Incorporated

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

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

Diversification Opportunities for Enphase Energy, and Mastercard Incorporated

-0.9

Correlation Coefficient

Enphase Energy,  Mastercard Incorporated

Pay attention - limited upside

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

Pair Corralation between Enphase Energy, and Mastercard Incorporated

Assuming the 90 days trading horizon Enphase Energy, is expected to under-perform the Mastercard Incorporated. In addition to that, Enphase Energy, is 3.26 times more volatile than Mastercard Incorporated. It trades about -0.13 of its total potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.13 per unit of volatility. If you would invest  954,420  in Mastercard Incorporated on September 25, 2024 and sell it today you would earn a total of  103,706  from holding Mastercard Incorporated or generate 10.87% return on investment over 90 days.

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

Enphase Energy,  vs.  Mastercard Incorporated

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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Mastercard Incorporated

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Mastercard Incorporated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enphase Energy, and Mastercard Incorporated

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

The idea behind Enphase Energy, and Mastercard Incorporated 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.