Correlation Between Sunrun and Sunnova Energy

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

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

Diversification Opportunities for Sunrun and Sunnova Energy

0.95

Correlation Coefficient

Sunrun  Sunnova Energy

Almost no diversification

The 3 months correlation between Sunrun and Sunnova is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Sunrun Inc and Sunnova Energy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunnova Energy Inter and Sunrun 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 Sunrun Inc are associated (or correlated) with Sunnova Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunnova Energy Inter has no effect on the direction of Sunrun i.e., Sunrun and Sunnova Energy go up and down completely randomly.

Pair Corralation between Sunrun and Sunnova Energy

Considering the 90-day investment horizon Sunrun Inc is expected to under-perform the Sunnova Energy. But the stock apears to be less risky and, when comparing its historical volatility, Sunrun Inc is 1.69 times less risky than Sunnova Energy. The stock trades about -0.13 of its potential returns per unit of risk. The Sunnova Energy International is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,111  in Sunnova Energy International on August 30, 2024 and sell it today you would lose (570.00) from holding Sunnova Energy International or give up 51.31% of portfolio value over 90 days.

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

Sunrun Inc  vs.  Sunnova Energy International

Sunrun Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunrun Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sunnova Energy Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunnova Energy International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sunrun and Sunnova Energy

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

The idea behind Sunrun Inc and Sunnova Energy International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.