Correlation Between Enova International and Consumer Portfolio

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

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

Diversification Opportunities for Enova International and Consumer Portfolio

0.77

Correlation Coefficient

Enova International  Consumer Portfolio

Poor diversification

The 3 months correlation between Enova and Consumer is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and Consumer Portfolio Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Portfolio and Enova International 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 Enova International are associated (or correlated) with Consumer Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Portfolio has no effect on the direction of Enova International i.e., Enova International and Consumer Portfolio go up and down completely randomly.

Pair Corralation between Enova International and Consumer Portfolio

Given the investment horizon of 90 days Enova International is expected to generate 0.92 times more return on investment than Consumer Portfolio. However, Enova International is 1.08 times less risky than Consumer Portfolio. It trades about 0.2 of its potential returns per unit of risk. Consumer Portfolio Services is currently generating about 0.15 per unit of risk. If you would invest  8,084  in Enova International on September 5, 2024 and sell it today you would earn a total of  2,523  from holding Enova International or generate 31.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Enova International  vs.  Consumer Portfolio Services

Enova International

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enova International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Enova International sustained solid returns over the last few months and may actually be approaching a breakup point.

Consumer Portfolio

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Portfolio Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Consumer Portfolio unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enova International and Consumer Portfolio

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

The idea behind Enova International and Consumer Portfolio Services 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.