Correlation Between Enphase Energy and MaxLinear

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

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

Diversification Opportunities for Enphase Energy and MaxLinear

-0.47

Correlation Coefficient

Enphase Energy  MaxLinear

Very good diversification

The 3 months correlation between Enphase and MaxLinear is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear 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 MaxLinear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MaxLinear has no effect on the direction of Enphase Energy i.e., Enphase Energy and MaxLinear go up and down completely randomly.

Pair Corralation between Enphase Energy and MaxLinear

Given the investment horizon of 90 days Enphase Energy is expected to generate 17.87 times less return on investment than MaxLinear. But when comparing it to its historical volatility, Enphase Energy is 1.22 times less risky than MaxLinear. It trades about 0.03 of its potential returns per unit of risk. MaxLinear is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  1,455  in MaxLinear on September 28, 2024 and sell it today you would earn a total of  646.00  from holding MaxLinear or generate 44.4% return on investment over 90 days.

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

Enphase Energy  vs.  MaxLinear

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 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 recent confusion may also be a sign of long-lasting up-swing for the firm traders.

MaxLinear

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MaxLinear are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, MaxLinear disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enphase Energy and MaxLinear

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

The idea behind Enphase Energy and MaxLinear 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.