Correlation Between Ideal Power and Enovix Corp

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

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

Diversification Opportunities for Ideal Power and Enovix Corp

0.2

Correlation Coefficient

Ideal Power  Enovix Corp

Modest diversification

The 3 months correlation between Ideal and Enovix is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ideal Power and Enovix Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enovix Corp and Ideal Power 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 Ideal Power are associated (or correlated) with Enovix Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enovix Corp has no effect on the direction of Ideal Power i.e., Ideal Power and Enovix Corp go up and down completely randomly.

Pair Corralation between Ideal Power and Enovix Corp

Given the investment horizon of 90 days Ideal Power is expected to under-perform the Enovix Corp. But the stock apears to be less risky and, when comparing its historical volatility, Ideal Power is 1.47 times less risky than Enovix Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Enovix Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  863.00  in Enovix Corp on September 3, 2024 and sell it today you would earn a total of  62.00  from holding Enovix Corp or generate 7.18% return on investment over 90 days.

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

Ideal Power  vs.  Enovix Corp

Ideal Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ideal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Enovix Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enovix Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Enovix Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ideal Power and Enovix Corp

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

The idea behind Ideal Power and Enovix Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.