Correlation Between Nextracker and SolarEdge Technologies

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

By analyzing existing cross correlation between Nextracker Class A and SolarEdge Technologies, you can compare the effects of market volatilities on Nextracker and SolarEdge Technologies 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 Nextracker with a short position of SolarEdge Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextracker and SolarEdge Technologies.

Diversification Opportunities for Nextracker and SolarEdge Technologies

0.76

Correlation Coefficient

Nextracker  SolarEdge Technologies

Poor diversification

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

Pair Corralation between Nextracker and SolarEdge Technologies

Considering the 90-day investment horizon Nextracker Class A is expected to generate 0.97 times more return on investment than SolarEdge Technologies. However, Nextracker Class A is 1.04 times less risky than SolarEdge Technologies. It trades about 0.1 of its potential returns per unit of risk. SolarEdge Technologies is currently generating about -0.16 per unit of risk. If you would invest  4,483  in Nextracker Class A on February 15, 2024 and sell it today you would earn a total of  288.00  from holding Nextracker Class A or generate 6.42% return on investment over 90 days.

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

Nextracker Class A  vs.  SolarEdge Technologies

Nextracker Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextracker Class A 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 comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

SolarEdge Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolarEdge Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nextracker and SolarEdge Technologies

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

The idea behind Nextracker Class A and SolarEdge Technologies 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.