Correlation Between Enova International and Horizon Space

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Can any of the company-specific risk be diversified away by investing in both Enova International and Horizon Space 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 Space 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 Space Acquisition, you can compare the effects of market volatilities on Enova International and Horizon Space 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 Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enova International and Horizon Space.

Diversification Opportunities for Enova International and Horizon Space

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Enova and Horizon is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and Horizon Space Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Space Acquisition 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 Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Space Acquisition has no effect on the direction of Enova International i.e., Enova International and Horizon Space go up and down completely randomly.

Pair Corralation between Enova International and Horizon Space

Given the investment horizon of 90 days Enova International is expected to generate 13.85 times more return on investment than Horizon Space. However, Enova International is 13.85 times more volatile than Horizon Space Acquisition. It trades about 0.08 of its potential returns per unit of risk. Horizon Space Acquisition is currently generating about 0.14 per unit of risk. If you would invest  5,256  in Enova International on September 30, 2024 and sell it today you would earn a total of  4,532  from holding Enova International or generate 86.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Enova International  vs.  Horizon Space Acquisition

 Performance 
       Timeline  
Enova International 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Enova International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Enova International sustained solid returns over the last few months and may actually be approaching a breakup point.
Horizon Space Acquisition 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Space Acquisition are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Horizon Space is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Enova International and Horizon Space Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Enova International and Horizon Space

The main advantage of trading using opposite Enova International and Horizon Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enova International position performs unexpectedly, Horizon Space 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 Space will offset losses from the drop in Horizon Space's long position.
The idea behind Enova International and Horizon Space Acquisition 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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