Correlation Between Enova International and Horizon Technology

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

By analyzing existing cross correlation between Enova International and Horizon Technology Finance, you can compare the effects of market volatilities on Enova International and Horizon Technology 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 Horizon Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enova International and Horizon Technology.

Diversification Opportunities for Enova International and Horizon Technology

-0.9

Correlation Coefficient

Enova International  Horizon Technology

Pay attention - limited upside

The 3 months correlation between Enova and Horizon is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and Horizon Technology Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Technology 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 Horizon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Technology has no effect on the direction of Enova International i.e., Enova International and Horizon Technology go up and down completely randomly.

Pair Corralation between Enova International and Horizon Technology

Given the investment horizon of 90 days Enova International is expected to generate 2.08 times more return on investment than Horizon Technology. However, Enova International is 2.08 times more volatile than Horizon Technology Finance. It trades about 0.22 of its potential returns per unit of risk. Horizon Technology Finance is currently generating about -0.19 per unit of risk. If you would invest  7,735  in Enova International on September 12, 2024 and sell it today you would earn a total of  2,481  from holding Enova International or generate 32.07% return on investment over 90 days.

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

Enova International  vs.  Horizon Technology Finance

Enova International

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enova International are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Enova International sustained solid returns over the last few months and may actually be approaching a breakup point.

Horizon Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horizon Technology Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Enova International and Horizon Technology

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

The idea behind Enova International and Horizon Technology Finance 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.