Correlation Between Enfusion and Applovin Corp

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

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

Diversification Opportunities for Enfusion and Applovin Corp

0.87

Correlation Coefficient

Enfusion  Applovin Corp

Very poor diversification

The 3 months correlation between Enfusion and Applovin is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Enfusion and Applovin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applovin Corp and Enfusion 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 Enfusion are associated (or correlated) with Applovin Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applovin Corp has no effect on the direction of Enfusion i.e., Enfusion and Applovin Corp go up and down completely randomly.

Pair Corralation between Enfusion and Applovin Corp

Given the investment horizon of 90 days Enfusion is expected to generate 4.49 times less return on investment than Applovin Corp. But when comparing it to its historical volatility, Enfusion is 3.45 times less risky than Applovin Corp. It trades about 0.23 of its potential returns per unit of risk. Applovin Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  10,561  in Applovin Corp on September 12, 2024 and sell it today you would earn a total of  23,260  from holding Applovin Corp or generate 220.24% return on investment over 90 days.

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

Enfusion  vs.  Applovin Corp

Enfusion

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enfusion are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Enfusion displayed solid returns over the last few months and may actually be approaching a breakup point.

Applovin Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applovin Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Applovin Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enfusion and Applovin Corp

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

The idea behind Enfusion and Applovin Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.