Correlation Between Capital One and Enova International

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Can any of the company-specific risk be diversified away by investing in both Capital One and Enova International 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 Capital One and Enova International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital One Financial and Enova International, you can compare the effects of market volatilities on Capital One and Enova International 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 Capital One with a short position of Enova International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Enova International.

Diversification Opportunities for Capital One and Enova International

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Capital and Enova is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Enova International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enova International and Capital One 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 Capital One Financial are associated (or correlated) with Enova International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enova International has no effect on the direction of Capital One i.e., Capital One and Enova International go up and down completely randomly.

Pair Corralation between Capital One and Enova International

Considering the 90-day investment horizon Capital One is expected to generate 1.64 times less return on investment than Enova International. But when comparing it to its historical volatility, Capital One Financial is 1.12 times less risky than Enova International. It trades about 0.11 of its potential returns per unit of risk. Enova International is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,091  in Enova International on September 23, 2024 and sell it today you would earn a total of  5,556  from holding Enova International or generate 135.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Capital One Financial  vs.  Enova International

 Performance 
       Timeline  
Capital One Financial 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.
Enova International 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Enova International are ranked lower than 8 (%) 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.

Capital One and Enova International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Capital One and Enova International

The main advantage of trading using opposite Capital One and Enova International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Enova International 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 Enova International will offset losses from the drop in Enova International's long position.
The idea behind Capital One Financial and Enova International 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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